Question

Hawk Corporation purchased 10,000 Diamond Corporation bonds in 2015 for $58 per bond and classified the investment as securities available for sale. The value of the Diamond investment was $82 per bond on December 31, 2016, and $106 on December 31, 2017. During 2018, Hawk sold all of its Diamond investment at $144 per bond. In its 2018 income statement, Hawk would report:

Answer 1

Answer:

$860,000

Explanation:

The computation of total realized is shown below:-

Hawk Corporation accumulated an unrealized gain = ($106 - $58) × 10,000 shares

= $480,000

An additional increase of($144 - $106) × 10,000 shares

= $38 × 10,000

= $380,000

Hawk shall report a total realized gain in income statement = Hawk Corporation accumulated an unrealized gain + An additional increase

= $480,000 + $380,000

= $860,000