Please help cannot figure out, please show work Brooks Company received proceeds

Question

Please help cannot figure out, please show work

Brooks Company received proceeds of $188,500 on 10-year, 8% bonds issued on January 1, 2015. The bonds had a face value of $200,000, pay interest annually on January 1, and have a call price of 101. Brooks uses the straight-line method of amortization. Brooks Company decided to redeem the bonds on January 1, 2017. What amount of gain or loss would Brooks report on its 2017 income statement? A. $11,200 loss B. $11,200 gain C. $9,200 gain D. $9,200 loss

Explanation / Answer

Call price of the bond = 101

Therefore, if we redeem the bond we will have to pay $200000*101/100 = $202000 therefore we will invite loss of $2000

Also bonds are issued at discount of ($200000-$188500) = $11500

But bond were issued in Jan 2015 and are redeemed on Jan 2017 therefore for 2 years we must have amortised discount on bond

Therefore already amortized = $11500/10 = $1150 per year

Therefore discount on issue of bond pending amortisation = $11500-$1150-$1150 = $9200

Therefore total loss = $9200+$2000 = $11200

Therefore correct answer is option A I.e $11200 loss

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