My observations using a recent OpenJDK have shown that only once a method exits do any references it orphaned actually get collected. I did not expect this at all, but it's what happened. Extracting those lines of code into another method, which would then return back to main(), did allow the instance to be collected.
I think this is a dumb question. (EDIT: I mean the exam question! Not insulting the submitter!) It's all in how you define "eligible". In my case, I'd say once there were no references left, the instance was eligible to be collected, it's just that it never would actually be collected until sometime after the method returns.