The following information relates to the Starr Company’s Investment in Available-for-Sale Bonds account for 2007:

Jan. 1 Purchased $30,000 face value of Bradford Company 8% bonds at 97 to yield 10%; interest on the bonds is payable each June 30 and December 31

Jan. 1 Purchased $40,000 face value of Morris Company 10% bonds at 101 to yield 9.8%; interest on the bonds is payable each June 30 and December 31

On June 30, collected the interest and the following information is available:

Security Fair Value

Bradford Company 8% .... 97.2

Morris Company 10% .... 102.0

July 1 Purchased $25,000 face value of Whipple Corporation 11% bonds at 92 to yield 12%; interest on the bonds is payable each June 30 and December 31

Nov. 30 Sold the Whipple bonds at 91 plus accrued interest

On December 31, collected the interest, sold the Morris bonds at 102, and the following information is also available:

Security Fair Value

Bradford Company ...... 8% 96

Required

1. Prepare journal entries to record the previous information for 2007. 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 2007 semiannual income statement.

3. Show how the investment items are reported on each of the 2007 semiannual balance sheets, assuming that management expects to dispose of all investments within one year of purchase.