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8 May, 01:49

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:

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  1. 8 May, 02:56
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    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
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