Question

Hawk Corporation purchased 10,000 Diamond Corporation bonds in 2015 for $61 per bond and classified the investment as securities available for sale. The value of the Diamond investment was $73 per bond on December 31, 2016, and $92 on December 31, 2017. During 2018, Hawk sold all of its Diamond investment at $146 per bond. In its 2018 income statement, Hawk would report:

Answer 1

Answer:

Explanation:

In this question ,we take the difference of the per bond value based on the year. The computation is shown below:

During 2015 to During 2017:

= Number of bonds purchased × (December 31, 2017 value - 2015 value)

= 10,000 × ($92 - $61)

= 10,000 × $31

= $310,000

During 2018:

= Number of bonds purchased × (December 31, 2018 value - 2017 value)

= 10,000 × ($146- $92)

= 10,000 × $54

= $540,000

So, the total amount would be

= $310,000 + $540,000

= $850,000

This amount which reflect in the income statement as a realized gain