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Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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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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