4) On January 1, Year 1, Gearty Corporation loans Olinto Fabrix, Inc. $200,000 with a 10% simple interest note payable in ten years. Interest on the note is payable annually and the principal is due at the end of the term. On January 1, Year 3, Olinto has yet to pay any interest and approaches Gearty in the hope of renegotiating the terms. Gearty agrees, forgives the interest on the note accrued to date, and reduces the interest to 8 percent. The following present value amounts are available. Present Value of $1 Present Value of an Annuity 8% 10% 8% 10% Eight years .540 .467 5.767 5.335 Ten years .463 .386 6.710 6.145 As a result of this troubled debt restructuring, Gearty should record: A) An extraordinary loss of $39,900. B) An extraordinary loss of $56,100. C) Bad debt expense of $64,480. D) A valuation allowance of $61,240