You are an accounting intern working for SpringFit Corporation. You have recently been assigned to help one of the accountants who is doing an internal audit of the business. You will be assisting with a review of the payables issued by SpringFit Corporation. Your first task is to review the previous year’s journal entries, shown as follows: Journal Entries, Year 1 Journal Date Description Debit Credit Jan. 1 Cash 1,004,720              Premium on Bonds Payable   58,720            Bonds Payable   946,000               Jun. 30 Interest Expense 18,349           Premium on Bonds Payable 2,936              Cash   21,285               Jul. 1 Cash 1,921,280           Discount on Bonds Payable 78,720              Bonds Payable   2,000,000               Dec. 31 Interest Expense 18,349           Premium on Bonds Payable 2,936              Cash   21,285               31 Interest Expense 41,560              Discount on Bonds Payable   6,560            Cash   35,000               31 Retained Earnings 78,258              Interest Expense   78,258       Bonds Payable Review the journal entries on the SpringFit Corporation panel, then answer the following questions. 1. Assuming that no bonds had been issued prior to Year 1, how many different bonds appear in the journal entries for this year?   2. Which entry shows bonds issued at a contract rate lower than the market rate of interest? Choose the date. July 1  3. How much interest was paid during the year on the bonds in question (2)? $

You are an accounting intern working for SpringFit Corporation. You have recently been assigned to help one of the accountants who is doing an internal audit of the business. You will be assisting with a review of the payables issued by SpringFit Corporation. Your first task is to review the previous year’s journal entries, shown as follows:

Journal Entries, Year 1

Journal
Date Description Debit Credit
Jan. 1 Cash 1,004,720        
     Premium on Bonds Payable   58,720      
     Bonds Payable   946,000      
       
Jun. 30 Interest Expense 18,349        
  Premium on Bonds Payable 2,936        
     Cash   21,285      
       
Jul. 1 Cash 1,921,280        
  Discount on Bonds Payable 78,720        
     Bonds Payable   2,000,000      
       
Dec. 31 Interest Expense 18,349        
  Premium on Bonds Payable 2,936        
     Cash   21,285      
       
31 Interest Expense 41,560        
     Discount on Bonds Payable   6,560      
     Cash   35,000      
       
31 Retained Earnings 78,258        
     Interest Expense   78,258      

Bonds Payable

Review the journal entries on the SpringFit Corporation panel, then answer the following questions.

1. Assuming that no bonds had been issued prior to Year 1, how many different bonds appear in the journal entries for this year?

 

2. Which entry shows bonds issued at a contract rate lower than the market rate of interest? Choose the date.

July 1 

3. How much interest was paid during the year on the bonds in question (2)?

$

4. What is the carrying amount of the bonds in question (2) at the end of the year?

$

5. Which entry shows bonds that sold for more than their face amount? Choose the date.

Jan. 1

6. How much interest was paid during the year on the bonds in question (5)?

$

7. Assuming that straight-line amortization is used for the bonds in question (5), what is the bond life?

10 years 

8. What is the carrying value of the bonds in question (5) at the end of the year?

$

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