Hills Corp

Hills Corp. called an outstanding bond obligation four years before maturity. At that time there was an unamortized discount of $ 200,000. To extinguish this debt, Hills had to pay a call premium of $ 40,000. Ignoring income tax considerations, how should these amounts be treated for accounting purposes?

A) Amortize $ 240,000 over four years.
B) Record a $ 240,000 loss in the year of extinguishment.
C) Record a $ 40,000 loss in the year of extinguishment and amortize $ 200,000 over four years.
D) Either amortize $ 240,000 over four years or record a $ 240,000 loss immediately, whichever management selects.