Collins Co. issued $200,000 of 10 year zero-coupon bonds. After five years, the book value of the bonds was $178,000. Collins Co. decided that it no longer needed the debt, and consequently, decided to retire the bonds early at a cost of $170,000.
What effect does the early retirement have on the company’s net income? Select one:
a. Gain on early retirement of $30,000
b. Gain on early retirement of $8,000
c. Loss on early retirement of $16,000
d. No effect