Amortization of bond premium on straight-line method

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Question: On January 1, 2012, Bonita Industries issued $18000000 of 10% ten-year bonds at 102. The bonds are callable at the option of Bonita at 104. Bonita has recorded amortization of the bond premium on the straight-line method (which was not materially different from the effective-interest method). On December 31, 2018, when the fair value of the bonds was 95, Bonita repurchased $4020000 of the bonds in the open market at 95. Bonita has recorded interest and amortization for 2018. Ignoring income taxes and assuming that the gain is material, Bonita should report this reacquisition as

a. a gain of $205000.

b. a loss of $253000.

c. a gain of $253000.

d. a loss of $205000.

Reference no: EM131748960

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