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, 2020 for $100,000, when Duff's bond liability consisted of $240,000 par of 12% bonds maturing on January 1, 2030. 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 2020, Paddy earned a net income of $80,000 and paid dividends of $20,000.

1. What amount of interest expense, excluding amortization of the bond discount, (if any) would have to be eliminated in 2020 as a result of the intercompany sale of the bonds?

A. None

B. $12,000

C. $12,200

D. $14,400

2. What amount would be shown on Duff's 2020 Consolidated Statement of Financial Position under bonds payable?

A. $110,000

B. $111,000

C. $112,000

D. $220,000