Journal Entries, Year 1 Journal Date Credit Jan. 1 Description Cash Premium on Bonds Payable Bonds Payable Debit 1,008,960 58,960 950,000 Jun. 30 Interest Expense Premium on Bonds Payable Cash 18,427 2,948 21,375 Jul. 1 Cash Discount on Bonds Payable Bonds Payable 1,921,280 78,720 2,000,000 Dec. 31 Interest Expense Premium on Bonds Payable Cash 18,427 2,948 21,375 31 41,560 Interest Expense Discount on Bonds Payable Cash 6,560 35,000 78,414 31 Retained Earnings Interest Expense 78,414 Review the journal entries on the Spring Fit 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 y 2 2. Which entry shows bonds issued at a contract rate lower than the market rate of interest? Choose the date. July 1 x 3. How much interest was paid during the year on the bonds in question (2)? 41,560 x 4. What is the carrying amount of the bonds in question (2) at the end of the year? 1,666,600 x 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)? 42,750 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? 855,500 X 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 Credit Date Description Jun. 30 Interest Expense Premium on Bonds Payable Cash Debit 18,427 2,948 21,375 30 41,560 Interest Expense Discount on Bonds Payable Cash 6,560 35,000 30 2,000,000 Bonds Payable Gain on Redemption of Bonds Discount on Bonds Payable Cash 41,000 65,600 1,893,400 Chapter 11 Mastery Problem Dec. 31 Interest Expense Premium on Bonds Payable Cash 18,427 2,948 21,375 31 78,414 Retained Earnings Interest Expense 78,414 31 Bonds Payable Premium on Bonds Payable Loss on Redemption of Bonds Cash 475,000 23,584 20,600 519,184 Final Questions 519,184 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? No 2. You suspect there is an error in one of the bond redemption entries. Assuming that the amounts are correct, Dec. 31, Year 2 x Why? None of these answers is correct. X 3. Why do some bonds sell below face value? None of these answers is correct. 4. Which of the following items are amortized?