ou 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 GENERAL JOURNAL ACCOUNTING EQUATION DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 Jan. 1 Cash 1,062,060.00 ↑ 2 Premium on Bonds Payable 62,060.00 ↑ 3 Bonds Payable 1,000,000.00 ↑ 4 Jun. 30 Interest Expense 19,397.00 ↓ 5 Premium on Bonds Payable 3,103.00 ↓ 6 Cash 22,500.00 ↓ 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 19,397.00 ↓ 11 Premium on Bonds Payable 3,103.00 ↓ 12 Cash 22,500.00 ↓ 13 31 Interest Expense 41,560.00 ↓ 14 Discount on Bonds Payable 6,560.00 ↑ 15 Cash 35,000.00 ↓ 16 31 Income Summary 80,354.00 ↓ 17 Interest Expense 80,354.00 ↑ 4. What is the carrying amount of the July 1 bond at the end of the year? 6. How much interest was paid during the year on the premium bonds? 7. Assuming that straight-line amortization is used for the premium bonds, what is the bond life? 8. What is the carrying value of the premium bonds at the end of the year?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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

GENERAL JOURNAL

ACCOUNTING EQUATION

	DATE	ACCOUNT TITLE	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Jan. 1	Cash	1,062,060.00		↑
2		Premium on Bonds Payable		62,060.00		↑
3		Bonds Payable		1,000,000.00		↑
4	Jun. 30	Interest Expense	19,397.00				↓
5		Premium on Bonds Payable	3,103.00			↓
6		Cash		22,500.00	↓
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	19,397.00				↓
11		Premium on Bonds Payable	3,103.00			↓
12		Cash		22,500.00	↓
13	31	Interest Expense	41,560.00				↓
14		Discount on Bonds Payable		6,560.00		↑
15		Cash		35,000.00	↓
16	31	Income Summary	80,354.00				↓
17		Interest Expense		80,354.00			↑




4.	What is the carrying amount of the July 1 bond at the end of the year?

6.	How much interest was paid during the year on the premium bonds?
7.	Assuming that straight-line amortization is used for the premium bonds, what is the bond life?
8.	What is the carrying value of the premium bonds at the end of the year?

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