On January 1, 2020, Nanke Inc. issued $500,000 of 9 percent, five-year bonds payable at 104. Nanke has extra cash and wishes to retire all the bonds payable on January 1, 2021, immediately after making the second semi-annual interest payment. Nanke uses the straight-line method of amortization. To retire the bonds, Nanke pays the market price of 97.

a. What is Nanke’s carrying amount of the bonds payable on the retirement date?

b. How much cash must Nanke pay to retire the bonds payable?

c. Compute Nanke’s gain or loss on the retirement of the bonds payable.