The December 31, 2004, balance sheet of Dodge Corporation includes the following items:

9% bonds payable due December 31, 2013 $1,400,000

Unamortized premium on bonds payable 37,800

The bonds were issued on December 31, 2003, at 103, with interest payable on December 31 of each year. Dodge uses straight-line amortization.

On December 31, 2005, Dodge retired these bonds at 98 . What should Dodge record as a gain or loss on retirement of these bonds?

9% Bonds payable... Dr 140,0000
Premium on Bonds payable... Dr 37,800
To Cash 1,37,200
To gain on retirement of Bonds payable 40,600