Schiff Stores has outstanding $100,000 of 7 percent bonds callable at 103. On July 1, immediately after recording the payment of the semiannual interest and the amortization of the premium, the unamortized bond premium equaled $2,500. On that date, all of the bonds were called and retired.

a. How much cash must be paid to retire the bonds?

b. Is there a gain or loss on retirement? If so, how much is it?