S-corp has accrued market discount ($540) on US Treasury bond sold.  When entered this transaction in Sch D, Lacerte automatically deduct the gain.  But, are we supposed to report this as interest incomes somewhere?

I can not find where does Lacerte report this $540 interest incomes in S-Corp program.  Does anyone know?

Also, should this $540 be tax-exempt incomes for CA and pass through to shareholder?