Response to the following problem:
Soap Company issued $200,000 of 8%, 5-year bonds on January 1, 20X6. The discount on issuance was $12,000. Bond interest is paid annually on December 31. On December 31, 20X8, Pumice Company purchased one-half of the outstanding bonds for $96,000. Both companies use the straight-line method of amortization. What amount of gain or loss from retirement of debt will be reported on the 20X8 consolidated financial statements?
a. $1,600 gain.
c. $1,200 gain.
b. $1,600 loss.
d. $1,200 loss.
How do you calculate the answer?