A Government Defeased In-Substance $10 Million of Old Enterprise Fund

A government defeased in-substance $10 million of old Enterprise Fund bonds by paying $12 million into a qualifying trust for that purpose. The refunded bonds had an unamortized premium of $200,000 and a prepaid bond insurance balance of $50,000. Resources to finance the defeasance of the old bonds were provided by issuing $12,000,000 of new bonds issued at par. What amount of deferred interest expense adjustment should the government report?

A) $0.
B) $1,850,000 debit.
C) $1,800,000 debit.
D) $1,850,000 credit.