Harter Corporation issued 10-year 8% $100 million coupon bonds in 20X5. In 20X5, the market interest rate was 6%. The current market interest rate is 9%. Harter has generated unexpectedly strong profits over the last several years. Given a high cash balance, the company is considering repurchasing the entire bond issue. If Harter repurchases the bonds, what is the immediate effect in Harter’s income statement?
A. A loss is recognized.
B. A gain is recognized.
C. No gain or loss is recognized.
D. Insufficient information to determine whether there is a gain or loss.