Nichols Corporation purchased $190,000 of Holly Inc. 5.0% bonds at par with the intent and ability to hold the bonds until they matured in 2022, so Nichols classifies its investment as held to maturity. Unfortunately, a combination of problems at Holly and in the debt market caused the fair value of the Holly investment to decline to $159,000 during 2018. Nichols calculates that, of the $31,000 decrease in fair value, $8,000 of it relates to credit losses and $23,000 relates to noncredit losses. Assume that Nichols concludes that the Holly bonds are other-than-temporarily impaired because Nichols is planning to sell the bonds in the near future. Before-tax net income for 2018 will be reduced by:

Multiple Choice

• $31,000.

• $0.

• $23,000.

• $8,000.