The following Liu Corporation transactions are for bonds that were purchased as trading investments for the year ended December 31, 2012:

Jan. 1 Purchased $100,000 of RAM Corporation 8% bonds at 96. Interest is received semi-annually on July 1 and January 1. The bonds mature on January 1, 2014.

July 1 Received interest on the RAM bonds.

2 Sold $25,000 of RAM bonds at 100.

Dec. 31 Accrued interest on the remaining bonds.

31 The fair value of the remaining bonds was 101 on this date.

Instructions

(a) Record the above transactions, including required adjusting entries (if any).

(b) Show how the investments would be presented on the statement of financial position at December 31, 2012.

(c) Determine the balance in each of the income statement accounts that are affected in the transactions above and indicate how they would be presented on the income statement for the year ended December 31, 2012.