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 Spring Fit Corporation. Your first task is to review the previous year's journal entries, shown as follows: Journal Entries, Year 1 Journal Date Jan. 1 Description Debit Credit Cash 1,004,720 Premium on Bonds Payable Bonds Payable 58,720 946,000 Jun. 30 Interest Expense 18,349 Premium on Bonds Payable 2,936 Cash 21,285 Jul. 1 Cash 1,729,164 Discount on Bonds Payable 70,836 Bonds Payable 1,800,000 Dec. 31 Interest Expense 18,349 Premium on Bonds Payable 2,936 Cash 21,285 31 Interest Expense 37,403 Discount on Bonds Payable 5,903 Cash 31,500 31 Retained Earnings Interest Expense 74,101 74,101 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 entri 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? $ 5. Which entry shows bonds that sold for more than their face amount? Choose the date. 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 question (5), what is the bond life? 8. What is the carrying value of the bonds in question (5) at the end of the year? $ 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 Date Description Debit Credit Jun. 30 Interest Expense 18,349 Premium on Bonds Payable 2,936 Cash 21,285 30 Interest Expense 37,403 Discount on Bonds Payable Cash 5,903 31,500 30 Bonds Payable 1,800,000 Gain on Redemption of Bonds 41,000 Discount on Bonds Payable 59,030 1,699,970 Cash Dec. 31 Interest Expense 18,349 Premium on Bonds Payable 2,936 Cash 21,285 74,101 74,101 31 Retained Earnings Interest Expense 31 Bonds Payable 473,000 Premium on Bonds Payable Loss on Redemption of Bonds Cash nine teaching and learning sourc 23,488 20,600 517,088 Final Questions 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. 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