During 2012, Hauke Company purchased 4,000, $1,000, 9% bonds. The carrying value of the bonds at December 31, 2014 was $3,920,000. The bonds mature on March 1, 2019, and pay interest on March 1 and September 1. Hauke sells 2,000 bonds on September 1, 2015, for $1,976,000, after the interest has been received. Hauke uses straight-line amortization. The gain on the sale is

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The gain on the sale is calculated by comparing the selling price of the bonds to their carrying value at the time of sale. Since Hauke uses straight-line amortization, the carrying value of the bonds decreases evenly over time. The carrying value of all 4,000 bonds was $3,920,000 on December 31, 2014. By September 1, 2015, the carrying value would have decreased further due to amortization. Selling 2,000 of these bonds (half of the total) means we need to calculate the carrying value of these 2,000 bonds at the time of sale and compare it to the selling price of $1,976,000 to determine the gain. The calculation involves determining the amount of amortization per year, applying it to the period from December 31, 2014, to September 1, 2015, and then calculating the gain based on the difference between the carrying value of the sold bonds and their selling price. The correct answer reflects the gain calculated using this method.

During 2012, Hauke Company Purchased 4,000, $1,000, 9% Bonds