Sand,IncHas Outstanding $5,000,000,10%,20-Year Bonds

Sand,Inc.has outstanding $5,000,000,10%,20-year bonds.The bonds are callable at 104 on any interest date.The bonds were issued at par and mature in 10 years.Recently,interest rates have declined to 5% and the market price of the bonds has increased to 107.If the company exercises the call provision,the company will record:

A) A credit to cash of $5,350,000.
B) A loss of $200,000 on its income statement in the year the bonds are called.
C) A loss of $20,000 in the year the bonds are called and a $20,000 loss for the next 9 years.
D) A gain of $150,000 in the year the bonds are called.

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