Duff Inc Owns 75% of Paddy Corp

Duff Inc. owns 75% of Paddy Corp. and uses the Equity Method to account for its investment. Paddy purchased $120,000 face value of Duff's 12% par value bonds on January 1, 2011 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% Bonds maturing on January 1, 2021. There was an unamortized bond discount of $20,000 attached to the bonds on that date. Interest payment dates are June 30 and December 31 each year. Straight line amortization is used. Both companies have a December 31 year end. Intercompany bond gains and losses are to be allocated to each company. During 2011, Paddy earned a net income of $80,000 and paid dividends of $20,000. What amount of interest expense, excluding amortization of the bond discount, (if any) would have to be eliminated in 2011 as a result of the intercompany sale of the bonds?

A) None.
B) $12,000.
C) $12,200.
D) $14,400.