1. Mastery Problem: Liabilities: Bonds Payable

   SpringFit Corporation

   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 years 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	1,585,068
   	Discount on Bonds Payable	64,932
   	Bonds Payable		1,650,000
   Dec. 31	Interest Expense	18,349
   	Premium on Bonds Payable	2,936
   	Cash		21,285
   31	Interest Expense	34,286
   	Discount on Bonds Payable		5,411
   	Cash		28,875
   31	Retained Earnings	70,984
   	Interest Expense		70,984

   Bonds Payable

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

   1. Assuming that no A form of an interest-bearing note used by corporations to borrow on a long-term basis.bonds had been issued prior to Year 1, how many different bonds appear in the journal entries for this year?

   2

   • 1
   • 2
   • 3
   • 4
   • 5

   2. Which entry shows bonds issued at a The periodic interest to be paid on the bonds that is identified in the bond indenture; expressed as a percentage of the face amount of the bond.contract rate lower than the The rate determined from sales and purchases of similar bonds.market rate of interest? Choose the date.

   July 1

   • Jan. 1
   • June 30
   • July 1
   • Sept. 30
   • Oct. 1

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

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   4. What is the The balance of the bonds payable account (face amount of the bonds) less any unamortized discount or plus any unamortized premium.carrying amount of the bonds in question (2) at the end of the year?

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   5. Which entry shows bonds that sold for more than their An amount at which bonds sell if the market rate equals the contract rate.face amount? Choose the date.

   Jan. 1
   • Jan. 1
   • Jun. 30
   • Jul. 1
   • Sept. 30
   • Oct. 1
   • Dec. 31

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

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   7. Assuming that A method of amortizing a bond discount or premium that provides for the same amount of amortization each year.straight-line amortization is used for the bonds in question (5), what is the bond life?

   10 years

   • 5 years
   • 10 years
   • 15 years
   • 20 years
   • None of these
   • Cannot be determined

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

   $fill in the blank e28b2cff304bf96_8