The City of Williamsburg Decided to Defease Old 6 Percent

The City of Williamsburg decided to defease old 6 percent bonds carried in its Electric Enterprise Fund with new 4.5 percent bonds. As a result of the defeasance, the city incurred an accounting loss. The loss should be recognized

A) As an adjustment to retained earnings since it is applicable to prior periods.
B) In the year of the defeasance.
C) Over the remaining life of the old bonds or the new bonds, whichever is shorter.
D) It should not be recognized.