On March 23, 1998, about 0900 central standard time, a Cessna 152, N24543, registered to MC Airlease, Inc., descended into the Mississippi Sound near Dauphin Island, Alabama. Visual meteorological conditions prevailed at the time and no flight plan was filed for the 14 CFR Part 91 instructional flight. The airplane was substantially damaged and the certified flight instructor (CFI) sustained minor injuries. The student was not injured. The flight originated about 0830 from the Mobile Regional Airport, Mobile, Alabama. The CFI stated that the student had performed some maneuvers, then while flying at 3,500 feet mean sea level, she simulated an engine failure. The student maneuvered the airplane toward a nearby airport with some assistance for a forced landing. With a safe landing assured and at about 600 feet agl, she advised the student to recover. The student began to recover but was slow to add power; she applied full power. Communications with Air Traffic Control then took place and as the CFI was completing the communications, she felt an abrupt full left rudder input followed by a full aft elevator input by the student. The airplane immediately entered a spin to the left. The CFI took the controls and attempted to recover from the incipient spin but the main landing gear collided with the water. The airplane remained upright and both exited the airplane before it sank in about 6-8 feet of water. Postaccident examination of the flight controls by an FAA inspector revealed no evidence of preimpact failure or malfunction.