Salvador County Issued $25 Million of 5 Percent Demand Bonds

Salvador County issued $25 million of 5 percent demand bonds for construction of a county maintenance building. Before year-end the county entered into a two-year noncancellable take-out agreement with a local bank with a 10-year payback period. The county estimates that 20 percent of the bonds would be demanded (called) by the buyers if interest rates increased by at least One percentage point. At year-end, rates on comparable debt were 7 percent. How should these demand bonds be reported in the county's government-wide financial statements at year-end?

A) $25 million in the long-term liabilities section of the governmental activities column.
B) $5 million in the current liabilities section of the governmental activities column AND $20 million in the long-term liabilities section of the governmental activities column.
C) $5 million in the governmental activities column AND $20 million would be reported in the schedule of changes in long-term obligations.
D) $25 million in the current liabilities section of the governmental activities column.