Hawk Corporation purchased 1,000 Diamond Corporation bonds in 2015 for $500 per bond and classified the investment as securities available for sale. The value of the Diamond investment was $600 per bond on December 31, 2016, and $650 on December 31, 2017. During 2018, Hawk sold all of its Diamond investment at $700 per bond. In its 2018 income statement, Hawk would report:

Question

Quizplus · Accepted Answer

In 2015-2017, Hawk accumulated an unrealized holding gain and fair value adjustment of ($650 - 500) × 1,000 shares = $150,000. An additional increase of $50,000 occurred in 2018, so the total gain realized in the income statement upon sale would be $200,000.

Hawk Corporation Purchased 1,000 Diamond Corporation Bonds in 2015 for $500