Company Planets Galore owns 100% of the common stock of Saturn Inc. Saturn carries 10-year 8% bonds, issued to yield 7%, on its balance sheet. On January 1 of the current year, Planets Galore bought all Saturn's outstanding bonds at a price reflecting a current effective interest rate of 9%. How should this transaction be reflected in the consolidated financial statements for the current year?

A: The bonds are treated as having been retired, with an ordinary gain shown in the consolidated income statement.

B: The bonds remain in the balance sheet and are accounted for at a 9% effective rate.

C: The bonds remain in the balance sheet and are accounted for at a 7% effective rate.

D: The bonds are treated as having been retired, with an ordinary loss shown on the consolidated income statement.