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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

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 1,921,280
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

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)?

$fill in the blank 2212ca069068049_3

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

$fill in the blank 2212ca069068049_4

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)?

$fill in the blank 2212ca069068049_6

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?

$fill in the blank 2212ca069068049_8

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