On December 31, 2010, a company has a $20,000, 6% annual coupon bond outstanding that matures in three years. The bond was issued when the prevailing rate of interest was 7%. On December 31, 2010, the company negotiates a restructuring agreement with the bondholder. The face value (amount payable at maturity) of the bond is reduced to $170,000 and the annual interest payments are reduced to $9,000 each.

How much gain on restructuring will the company recognize on December 31, 2010?

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