1. No

Yes

Cannot Be Determined

2. Both entries are correct.

Dec. 31, Year 2

Jun. 30 Year 2

Both entries have an error.

2. There should not be a gain on discounted bond

There should not be a loss on a bond with premium

Not all the bonds have been redeemed

None of these answers is correct

There is no error

3. Some bonds have longer maturity dates

Some bonds cannot be amortized effectively

Some bonds are sold at a discount or premium

The face value of some bonds is below market value

None of these answers is correct

4. a, c

b, e

d, f

d, a

c, g

h, f

Journal Entries, Year 2 You have been asked to continue your work on the SpringFit Corporation audit. The journal entries for the current year are shown as follows: Journal Debit Credit 18,349 Date Description Jun. 30 Interest Expense Premium on Bonds Payable Cash 2,936 21,285 30 34,286 Interest Expense Discount on Bonds Payable Cash 5,411 28,875 30 1,650,000 Bonds Payable Gain on Redemption of Bonds Discount on Bonds Payable 41,000 54,110 1,554,890 Cash Dec. 31 Interest Expense Premium on Bonds Payable Cash 18,349 2,936 21,285 31 70,984 Retained Earnings Interest Expense 70,984 31 Bonds Payable Premium on Bonds Payable Loss on Redemption of Bonds Cash 473,000 23,488 20,600 Final Questions Considering the journal entries for both years, answer the following questions. 1. Were the bonds in the entry on Dec. 31 of Year 2 redeemed at maturity? 2. You suspect there is an error in one of the bond redemption entries. Assuming that the amounts are correct, which entry is questionable? Why? 3. Why do some bonds sell below face value? 4. Which of the following items are amortized? a. Bonds b. Discounts c. Future cash receipts d. Redemption amount e. Premiums f. Contract rate of interest g. It depends on the face value of the bond h. Interest expenses