EXERCISE 12-1
Purpose: (L.O. 2, 5) This exercise will illustrate how to record transactions related to an investment in bonds.
The Humpty Dumpty Company had the following transactions and events pertaining to an investment in bonds:
April 1, 2014 | Acquired 100 King, Inc. 10%, 10-year, $1,000 bonds for $100,000. The bonds pay interest semiannually on April 1 and October 1; they mature on April 1, 2024. |
Oct. 1, 2014 | Received interest on the bonds. |
Dec. 31, 2014 | Adjusted the accounts in preparation of the financial statements. |
April 1, 2015 | Received interest on the bonds. |
July 31, 2015 | Sold all of the bonds for a price of $98,000 plus accrued interest. Incurred brokerage fees of $1,170. |
Instructions
Prepare all of the relevant journal entries to record the transactions and events listed above.
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