On July 1,2011,immediately After Recording Interest Payments,Salsa,Inc

Multiple Choice

On July 1,2011,immediately after recording interest payments,Salsa,Inc.retired one fifth of its $500,000 of bonds payable for $97,500.The bonds were originally issued at par value in 2006.Which of the following statements is correct?

A) Stockholders' equity is not affected by the bond retirement.
B) A gain of $2,500 will be reported on the income statement.
C) A loss of $2,500 will be reported on the income statement.
D) A gain of $402,500 will be reported on the income statement.