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Thompkins, Inc., owns Pastimer Company, which had a bond payable outstanding on January 1, 2009, with a book value of $189,000. The parent acquired the bond on that date for $206,000. Sub-sequently in 2009, Pastimer reported interest income of $18,000 and Thompkins reported interest expense of $21,000. Consolidated financial statements are being prepared for 2010. What adjustment is needed for the Retained Earnings balance as of January 1, 2010?

a. Reduction of $20,000.

b. Reduction of $14,000.

c. Reduction of $3,000.

d. Reduction of $22,000.

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