OPTIONS:

1. Yes, no, or cannot be determined

2.

A. Both entries are correct

B. Dec 31 Year 2

C. June 30 Year 2

D. Both entries have an error.

Second part of question 2:

A. There should not be a gain on a discounted bond

B. There should not be a loss on a bond with a premium

C. Not all the bonds should have been redeemed.

D. None of these answers are correct

C. There is no error

3.

A. Some bonds have longer maturity dates

B. Some bonds cannot be amortized effectively

C. Some bonds are sold at a discount or premium

D. The face value of some bonds is below market value

E. None of these answers are 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 Credit Date Description Jun. 30 Interest Expense Premium on Bonds Payable Cash Debit 18,427 2,948 21,375 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 Cash 41,000 54,110 1,554,890 Dec. 31 Interest Expense Premium on Bonds Payable Cash 18,427 2,948 21,375 31 71,140 Retained Earnings Interest Expense 71,140 31 Bonds Payable Premium on Bonds Payable Loss on Redemption of Bonds Cash Final Questions 475,000 23,584 20,600 519,184 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? 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. 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 b, e