A Company Paid $100,000 for Corporate Bonds and Classified Them

A company paid $100,000 for corporate bonds and classified them as AFS. By year-end, the bonds declined in value to $80,000 due to credit losses. Which statement is true concerning the end-of-year adjustment for this investment?

A) No adjustment is required.
B) The investment account is directly reduced by $20,000 and a $20,000 loss is reported in OCI.
C) The investment account is directly reduced by $20,000 and a $20,000 loss is reported in income.
D) An allowance account is created to reduce the investment by $20,000, and a $20,000 loss is reported in income.