Powell Company Owns an 80% Interest in Sauter, Inc

Powell Company owns an 80% interest in Sauter, Inc. On January 1, 20X1, Sauter issued $400,000 of 10-year, 12% bonds at a premium of $50,000. On December 31, 20X5, 5 years after original issuance, Powell purchased all of the outstanding bonds for $390,000. Both firms use the straight-line method of amortization.
The interest adjustment in the 20X5 subsidiary income distribution schedule is ____.

A) $2,000
B) $5,000
C) $4,500
D) $0