You are an accounting intern working for SpringFit Corporation. You have recentl
ID: 2433051 • Letter: Y
Question
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
1
Jan. 1
Cash
1,008,960.00
?
2
Premium on Bonds Payable
58,960.00
?
3
Bonds Payable
950,000.00
?
4
Jun. 30
Interest Expense
18,427.00
?
5
Premium on Bonds Payable
2,948.00
?
6
Cash
21,375.00
?
7
Jul. 1
Cash
1,921,280.00
?
8
Discount on Bonds Payable
78,720.00
?
9
Bonds Payable
2,000,000.00
?
10
Dec. 31
Interest Expense
18,427.00
?
11
Premium on Bonds Payable
2,948.00
?
12
Cash
21,375.00
?
13
31
Interest Expense
41,560.00
?
14
Discount on Bonds Payable
6,560.00
?
15
Cash
35,000.00
?
16
31
Income Summary
78,414.00
?
17
Interest Expense
78,414.00
?
Bonds Payable
Shaded cells have feedback.
Review the journal entries on the SpringFit Corporation panel, then answer the following questions.
What is the carrying value of the bonds in question (5) at the end of the year? ......
PLEASE HELP #4 & 8
DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY1
Jan. 1
Cash
1,008,960.00
?
2
Premium on Bonds Payable
58,960.00
?
3
Bonds Payable
950,000.00
?
4
Jun. 30
Interest Expense
18,427.00
?
5
Premium on Bonds Payable
2,948.00
?
6
Cash
21,375.00
?
7
Jul. 1
Cash
1,921,280.00
?
8
Discount on Bonds Payable
78,720.00
?
9
Bonds Payable
2,000,000.00
?
10
Dec. 31
Interest Expense
18,427.00
?
11
Premium on Bonds Payable
2,948.00
?
12
Cash
21,375.00
?
13
31
Interest Expense
41,560.00
?
14
Discount on Bonds Payable
6,560.00
?
15
Cash
35,000.00
?
16
31
Income Summary
78,414.00
?
17
Interest Expense
78,414.00
?
Explanation / Answer
Answers
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 bonds have been issued, one on Jan 1 and other on Jul 1
2.
Which entry shows bonds issued at a contract rate lower than the market rate of interest? Choose the date.
Bonds issued on Jul 1, because these are issued at a discount and bonds are issued at discount when contract rate is lower than market rate.
3.
How much interest was paid during the year on the bonds in question (2)?
Interest paid in Cash = $ 35,000 on Dec 31
4.
What is the carrying amount of the bonds in question (2) at the end of the year? ....
Carrying amount = 1921280 + 6560 discount amortised = $ 1,927,840
5.
Which entry shows bonds that sold for more than their face amount? Choose the date.
Bonds issued on Jan1, because these are issued at a premium and bonds are issued at premium when contract rate is higher than market rate
6.
How much interest was paid during the year on the bonds in question (5)?
Jun 30 $ 21375 + Dec 31 $ 21375 = $ 42,750
7.
Assuming that straight-line amortization is used for the bonds in (5), what is the bond life?
Premium = 58960; Premium amortised in a year = (2948 x 2) = 5896; Life = 58960 / 5896 = 10 Years
8.
What is the carrying value of the bonds in question (5) at the end of the year?
Carrying value = 1008960 – premium amortised 5896 = $ 1,003,064
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 bonds have been issued, one on Jan 1 and other on Jul 1
2.
Which entry shows bonds issued at a contract rate lower than the market rate of interest? Choose the date.
Bonds issued on Jul 1, because these are issued at a discount and bonds are issued at discount when contract rate is lower than market rate.
3.
How much interest was paid during the year on the bonds in question (2)?
Interest paid in Cash = $ 35,000 on Dec 31
4.
What is the carrying amount of the bonds in question (2) at the end of the year? ....
Carrying amount = 1921280 + 6560 discount amortised = $ 1,927,840
5.
Which entry shows bonds that sold for more than their face amount? Choose the date.
Bonds issued on Jan1, because these are issued at a premium and bonds are issued at premium when contract rate is higher than market rate
6.
How much interest was paid during the year on the bonds in question (5)?
Jun 30 $ 21375 + Dec 31 $ 21375 = $ 42,750
7.
Assuming that straight-line amortization is used for the bonds in (5), what is the bond life?
Premium = 58960; Premium amortised in a year = (2948 x 2) = 5896; Life = 58960 / 5896 = 10 Years
8.
What is the carrying value of the bonds in question (5) at the end of the year?
Carrying value = 1008960 – premium amortised 5896 = $ 1,003,064
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