Cornhusker Corporation Plans to Raise $10 Million Cash on January

Cornhusker Corporation plans to raise $10 million cash on January 1,2010,by issuing either bonds payable (8% interest rate) or cumulative preferred stock (8% dividend rate) .How would the annual interest amount on the bonds or annual preferred dividend amount (if paid) affect the net income for the year ended December 31,2010?

A) Net income would be reduced by the annual interest on the bonds and by the annual preferred stock dividends.
B) Net income would be reduced by the annual interest on the bonds but not by the annual preferred stock dividends.
C) Net income would not be reduced by either the annual interest on the bonds or the annual preferred stock dividends.
D) Net income would be reduced by the annual preferred dividends but not by the annual interest on the bonds.