Bond Retirement Banner Company has bonds outstanding with a par value of $200,000 and a carrying value of $211,154 at July 1, 2002. The bonds can be called at 102 any time after January 1, 2002. The 5-year bonds have a stated rate of 14 percent and were issued on January 1, 2001, to yield 12 percent. Interest is paid semiannually.

a. If the bonds are retired at July 1, 2002, what amount of gain or loss will Banner report?

b. What factors should Banner Company take into consideration before deciding to retire the bonds?

c. If the market price of the bonds at July 1, 2002, was

$198,000 and Banner Company wished to retire the bonds, should Banner exercise the call feature? Explain.