Purchase and Sale of Bonds
Starship Enterprises enters into the following transactions during 2014 and 2015:
2014
Jan. 1: Purchased $100,000 face value of Northern Lights Inc. bonds at face value.
The newly issued bonds have an interest rate of 8% paid semiannually on June 30 and December 31. The bonds mature in five years.
June 30: Received interest on the Northern Lights Inc. bonds.
Dec. 31: Received interest on the Northern Lights Inc. bonds.
2015
Jan. 1: Sold the Northern Lights Inc. bonds for $102,000.
Required:
1. Prepare all necessary journal entries on Starship's records to account for its investment in the Northern Lights bonds.
2. Why was Starship able to sell its Northern Lights bonds for $102,000?