SpringFit Corporation Journal Entries, Year 1 PAGE 15 GENERAL JOURNAL ACCOUNTING EQUATION ACCOUNT TITLE POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY DATE Jan. 1 Cash 1,008,960.00 Premium on Bonds Payable 58,960.00 Bonds Payable 950,000.00 Jun 30 Interest Expense 18,427.00 Premium on Bonds Payable 2,948.00 Cash 21,375.00 Jul. 1 Cash 1.729,164.00 Discount on Bonds Payable 70,836.00 Bonds Payable 1,800,000.00 Dec 31 Interest Expense 18,427.00 Premium on Bonds Payable 2,948.00 Cash 21,375.00 31 Interest Expense 37,403.00 Discount on Bonds Payable 5,903.00 31,500.00 Cash 31 Income Summary 74,257.00 Interest Expense 74,257.00 Bonds Payable Review the journal entries on the SpringFit Corporation panel, then answer the following questions. Jan. 1 July 1 Sept. 30 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. Which entry shows bonds issued at a contract rate lower than the market rate of interest? Choose the date. 3. How much interest was paid during the year on the bonds in question (2)? $ 4. What is the carrying amount of the bonds in question (2) at the end of the year? $ Oct. 1 $16,500 5. Which entry shows bonds that sold for more than their face amount? Choose the date. $18,427 Dec. 31 June 30 $21,375 6. How much interest was paid during the year on the bonds in question (5)? 7. Assuming that straight-line amortization is used for the bonds in (5), what is the bond life? $36,854 8. What is the carrying value of the bonds in question (5) at the end of the year? $ 15 years $42,750 None of these $74,250 Cannot be determined None of these amounts 20 years 10 years 5 years Final Questions Considering the journal entries for both years, answer the following questions 1. Why do some bonds sell below face value? 2. Which of the following items are amortized? Check all that apply. Some bonds are sold at a discount or premium. Redemption amount Some bonds cannot be amortized effectively. Premiums Some bonds have longer maturity dates. It depends on the face value of the bond The face value of some bonds is below market value. Contract rate of interest The yield rate of interest is greater than the stated rate of interest. Discounts Future cash receipts Interest expenses Bonds