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 year's journal entries, shown as follows: Journal Entries, Year 1 PAGE 15 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. RET DESIT CREDIT ASSETS LIABILITIES EQUITY 1 Jan 1 Cash 1,008,960,00 1 7 Premium on Bonds Payable 58,960,00 1 3 950,000.00 1 Bonds Payable Jun 30 Interest Expense Premium on Bonds Payable 18,427.00 ! 1 2948.00 1 1 Cash 21375.00 1 Jul 1 Gash 1 1,921,280.00 78,720.00 . Discount on Bonds Payable Bonds Payable 2,000,000.00 1 Dec. 31 Interest Expense 18.427.00 Premium on Bonds Payable 11 2.948.00 + UUSTO LUCRU 10 Dec 31 1842700 Interest Expense Premium on Bonds Payable Cash 2.948.00 1 12 21,375.00 11 41,560.00 31 interest Expense Discount on Bonds Payable 14 6,560.00 1 15 Cash 35,000.00 16 7841400 1 31 Income Summary Interest Expense 78,414.00 1 Bonds Payable 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 contractate 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)? $35,000 4. What is the carrying amount of the bonds in question (2) at the end of the year? $1,927,840 5. Which entry shows bonds that sold for more than their face amount? Choose the date. Jan. 1 35,000 $1,927,840 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. Jan. 1 6. How much interest was paid during the year on the bonds in question (5) ? $42,750 7. Assuming that straight-line amortization is used for the bonds in (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? Year 2 Journal Entries 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 Entries, Year 2 PAGE 23 JOURNAL ACCOUNTING EQUATION PAGE 23 JOURNAL ACCOUNTING EQUATION POST. REK CREDIT ADSETS LIABILITIES DATE Jun 30 DESCRIPTION Interest Expense Premium on Bonds Payable 1 DEBIT 18,42700 2,948.00 QUITY 1 1 Cash 21,575.00 1 41,560.00 30 interest Expense Discount on Bonds Payable 6,560.00 1 Cash 35,000.00 7,000,000.00 ! . 30 Bones Payable Gain on Redemption of Bonds Discount on Bonds Payable 1 41,000.00 65,600.00 + Cash 1,893,400.00 + 11 Dec. 31 Interest Expense 18,427.00 11 2,948.00 1 Premium on Bonds Payable Cash 15 21,375.00 1 14 78,414.00 1 31 Income Surinary Interest Expense 78,414.00 1 31 Bonds Payable 475000.00 Interest Expense 78414.00 16 31 Bonds Payable 47500000 1 11 23.184.00 11 Premium on Bonds Payable Loss on Redemption of Bonds Cash 20,600.00 14 519,184.00 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? 3 Why do some bonds sell below face value? 4. Which of the following items are amortized? Check all that apply. 2 You suspect there is an error in one of the bond redemption entries. Assuming that the amounts are correct, which entry is questionable? 3. Why do some bonds sell below face value? 4. Which of the following them are amortized? Check all that apply. It depends on the face value of the bond Contract rate of interest Future can receipts Interest expenses Premium Redemption amount Bonds Discounts