The following information relates to Starr Company s

investment in available #2530

The following information relates to Starr Company’s investment in available- for- sale bonds
for 2016:Jan. 1 Purchased $ 30,000 face value of Bradford Company 8% bonds for $ 29,100.
The market rate of interest is 10%, and interest on the bonds is payable each June 30 and
December 31. 1 Purchased $ 40,000 face value of Morris Company 10% bonds for $ 40,400.
The market rate of interest is 9.8%, and interest on the bonds is payable each June 30 and
December 31.June 30 Collected the interest and the following information is available:Security
Fair ValueBradford Company 8% $ 29,160Morris Company 10% 40,800July 1 Purchased $
25,000 face value of Whipple Corporation 11% bonds for $ 23,000. The market rate of Interest
is 12%, and interest on the bonds is payable each June 30 and December 31. Nov. 30 Sold the
Whipple bonds for $ 22,750 plus accrued interest. Dec. 31 Starr collected the interest, sold the
Morris bonds for $ 40,800, and the following information is also available:Security Fair
ValueBradford Company 8% bonds $ 28,800Required:1. Prepare journal entries to record the
previous information for 2016. Use the effective interest method and round all amounts to the
nearest dollar. Assume that Starr prepares semiannual financial statements. 2. Show the items
of income or loss from investment transactions that Starr reports for each 2016 semiannual
income statement. 3. Show how the investment items are reported on each of the 2016
semiannual balance sheets, assuming that management expects to dispose of all investments
within one year of purchase.View Solution:
The following information relates to Starr Company s investment in available

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