A corporation has $600,000 of Bonds Payable and a $30,000 debit balance in Discount on Bonds Payable. It redeems one-third of the bonds for $195,000. What gain or loss results?

1. One-third of Bonds Payable is redeemed: \$600{,}000 \div 3 = \$200{,}000 face. 2. One-third of the discount is removed: \$30{,}000 \div 3 = \$10{,}000. 3. Carrying amount of the redeemed portion: \$200{,}000 - \$10{,}000 = \$190{,}000. 4. Cash paid is $195,000, which exceeds carrying amount, so there is a loss. 5. Loss: \$195{,}000 - \$190{,}000 = \$5{,}000. Option B mislabels the direction; cash paid exceeds carrying amount. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §5.4 "Partial Redemptions", p.237_