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 Journal Date Description Debit Credit Jan. 1 Cash 1,004,720 Premium on Bonds 58,720 Payable Bonds Payable 946,000 Jun. 30 Interest Expense 18,349 2,936 Premium on Bonds Payable Cash 21,285 Jul. 1 Cash Discount on Bonds Payable Bonds Payable 1,921,280 78,720 2,000,000 Dec. 31 18,349 Interest Expense Premium on Bonds Payable Cash 2,936 21,285 41,560 31 Interest Expense Discount on Bonds Payable Cash 6,560 35,000 31 Interest Expense 41,560 6,560 Discount on Bonds Payable Cash 35,000 78,258 31 Retained Earnings Interest Expense 78,258 Bonds Payable Review the journal entries on the Spring Fit 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 a. Which entry shows bonds issued at a contract rate lower than the market rate of interest? Choose the date. b. How much interest was paid during the year on the bonds in question (2)? $ C. What is the carrying amount of the bonds in question (2) at the end of the year? $ a Jan. 1 ine 1991 Sept. 30 Oct. H. d. Which entry shows bonds that sold for more than their face amount? Choose the date. e. How much interest was paid during the year on the bonds in question (5)? $ which entry sh Jan. 1 une 30 ole W Sept. 30 f. Assuming that straight-line amortization is used for the bonds in question (5), what is the bond life? g. What is the carrying value of the bonds in question (5) at the end of the year? $ 5 years 10 years 15 years KI 20 years None of these Cannot be determined 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. Interest Expense 18,349 30 Premium on Bonds 2,936 Payable Cash 21,285 41,560 30 Interest Expense Discount on Bonds Payable Cash 6,560 35,000 2,000,000 41,000 30 Bonds Payable Gain on Redemption of Bonds Discount on Bonds Payable Cash 65,600 1,893,400 18,349 Dec. Interest Expense 31 Premium on Bonds Payable Cash 2,936 21,285 78,258 31 Retained Earnings Interest Expense 78,258 78,258 31 Retained Earnings Interest Expense 78,258 473,000 23,488 31 Bonds Payable Premium on Bonds Payable Loss on Redemption of Bonds 20,600 Cash 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? Cannot be determined 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? Both entries are correct. Dec. 31, Year 2 Jun. 30. Year 2 There should not be a gain on a discounted bond. There should not be a loss on a bond with a premium. Not all the bonds have been redeemed. None of these answers is correct. There is no error. 3. Why do some bonds sell below face value? Some bonds have longer maturity dates. Some bonds cannot be amortized effectively. Some bonds are sold at a discount or premium. The face value of some bonds is below market value. None of these answers is correct. I Lined Up All The Choices With Each