Carlton, Inc. an accrual method C-corporation, borrowed $500,000 at 5% interest to purchase a $500,000 of City of Minneapolis bonds yielding 8% interest.

Question 3 (5 points Carlton, Inc., an accrual method C-Corporation, borrowed $500,000 at 5% interest to purchase a $500,000 of City of Minneapolis bonds yielding 8 % interest. In 2019, Carlton, Inc. accrued $25,000 in interest expense on the loan and $40,000 of interest income on the bond. Furthermore, in 2019, interest rates fell and the value of the bond increased to $530,000. Carlton, Inc. sold the City of Minneapolis bonds on December 31, 2019 for $530,000. How much income and deduction must Carlton, Inc. recognize in 2019 as a result of the above transactions? Please show your work and explain your