Brooks uses the straight-line method of amortization. Brooks Company redeemed the bonds on January 1, 2018
The amount of gain reported by Brooks its 2018 income statement relative to this transaction is $190,800
Explanation:
We know that the formula for carrying value is
Carrying value =Face value - Unamortized discount
Bonds have a face value of $200,000
Brooks Company received proceeds of $188,500
200,000 - 188,500 = 11,500 ( unamortized discount )
11,500 / 20 = 575 semiannual discount amortization
575 x 4 = 2,300 discount amortized after 4 interest payment periods.
11,500 - 2,300 = 9,200 unamortized discount
200,000 - 9,200 = $190,800 (Carrying Value)
The amount of gain reported by Brooks its 2018 income statement relative to this transaction is $190,800
