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.|
Prepare all of the relevant journal entries to record the transactions and events listed above.