=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, 20Y4PAGE 15 JOURNALACCOUNTING EQUATION DATEDESCRIPTIONPOST. REF.DEBITCREDITASSETSLIABILITIESEQUITY1Jan. 1Cash 1,008,960.00 ↑ 2 Premium on Bonds Payable 58,960.00 ↑ 3 Bonds Payable 950,000.00 ↑ 4Jun. 30Interest Expense 18,427.00 ↓5 Premium on Bonds Payable 2,948.00 ↓ 6 Cash 21,375.00↓ 7Jul. 1Cash 1,729,164.00 ↑ 8 Discount on Bonds Payable 70,836.00 ↓ 9 Bonds Payable 1,800,000.00 ↑ 10Oct. 1Cash 1,100,000.00 ↑ 11 Notes Payable 1,100,000.00 ↑ 12Dec. 31Interest Expense 18,427.00 ↓13 Premium on Bonds Payable 2,948.00 ↓ 14 Cash 21,375.00↓ 1531Interest Expense 16,500.00 ↓16 Interest Payable 16,500.00 ↑ 1731Interest Expense 37,403.00 ↓18 Discount on Bonds Payable 5,903.00 ↑ 19 Cash 31,500.00↓ 2031Income Summary 90,757.00 ↓21 Interest Expense 90,757.00 ↑Review the journal entries on the SpringFit Corporation panel, then answer the following questions.1.Assuming that no bonds had been issued prior to 20Y4, how many different bonds appear in the journal entries 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 (5), what is the bond life? 8.What is the carrying value of the bonds in question (5) at the end of the year? 9.Considering only the 20Y4 journal entries, how much interest was probably accrued on the note payable issued during the year? 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, 20Y5PAGE 23 JOURNALACCOUNTING EQUATION DATEDESCRIPTIONPOST. REF.DEBITCREDITASSETSLIABILITIESEQUITY1Jun. 30Interest Expense 18,427.00 ↓2 Premium on Bonds Payable 2,948.00 ↓ 3 Cash 21,375.00↓ 430Interest Expense 37,403.00 ↓5 Discount on Bonds Payable 5,903.00 ↑ 6 Cash 31,500.00↓ 730Bonds Payable 1,800,000.00 ↓ 8 Gain on Redemption of Bonds 41,000.00 ↑9 Discount on Bonds Payable 59,030.00 ↑ 10 Cash 1,699,970.00↓ 11Sep. 30Interest Expense 49,500.00 ↓12 Interest Payable 16,500.00 ↓ 13 Notes Payable 251,451.00 ↓ 14 Cash 317,451.00↓ 15Dec. 31Interest Expense 12,728.00 ↓16 Interest Payable 12,728.00 ↑ 1731Interest Expense 18,427.00 ↓18 Premium on Bonds Payable 2,948.00 ↓ 19 Cash 21,375.00↓ 2031Income Summary 136,485.00 ↓21 Interest Expense 136,485.00 ↑2231Bonds Payable 475,000.00 ↓ 23 Premium on Bonds Payable 23,584.00 ↓ 24 Loss on Redemption of Bonds 20,600.00 ↓25 Cash 519,184.00↓ Considering the journal entries for both years, answer the following questions.1.What is the yearly payment amount required for the note payable? (Assume it is an installment note.) 2.What is the interest rate on the note payable? 3.Were the bonds in the entry on Dec. 31 of 20Y5 redeemed at maturity? 4.You suspect there is an error in one of the bond redemption entries. Assuming that the amounts are correct, which entry is questionable? Why? 5.Why do some bonds sell below face value? 6. Which of the following items are amortized? Check all that apply. Redemption amount Bonds It depends on the face value of the bond Future cash receipts Contract rate of interest Discounts Premiums Interest expenses

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Answered: Review the journal entries on the…

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, 20Y4

PAGE 15

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
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	1,729,164.00		↑
8		Discount on Bonds Payable	70,836.00			↓
9		Bonds Payable		1,800,000.00		↑
10	Oct. 1	Cash	1,100,000.00		↑
11		Notes Payable		1,100,000.00		↑
12	Dec. 31	Interest Expense	18,427.00				↓
13		Premium on Bonds Payable	2,948.00			↓
14		Cash		21,375.00	↓
15	31	Interest Expense	16,500.00				↓
16		Interest Payable		16,500.00		↑
17	31	Interest Expense	37,403.00				↓
18		Discount on Bonds Payable		5,903.00		↑
19		Cash		31,500.00	↓
20	31	Income Summary	90,757.00				↓
21		Interest Expense		90,757.00			↑

Review the journal entries on the SpringFit Corporation panel, then answer the following questions.

1.	Assuming that no bonds had been issued prior to 20Y4, how many different bonds appear in the journal entries 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 (5), what is the bond life?
8.	What is the carrying value of the bonds in question (5) at the end of the year?
9.	Considering only the 20Y4 journal entries, how much interest was probably accrued on the note payable issued during the year?

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, 20Y5

PAGE 23

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Jun. 30	Interest Expense	18,427.00				↓
2		Premium on Bonds Payable	2,948.00			↓
3		Cash		21,375.00	↓
4	30	Interest Expense	37,403.00				↓
5		Discount on Bonds Payable		5,903.00		↑
6		Cash		31,500.00	↓
7	30	Bonds Payable	1,800,000.00			↓
8		Gain on Redemption of Bonds		41,000.00			↑
9		Discount on Bonds Payable		59,030.00		↑
10		Cash		1,699,970.00	↓
11	Sep. 30	Interest Expense	49,500.00				↓
12		Interest Payable	16,500.00			↓
13		Notes Payable	251,451.00			↓
14		Cash		317,451.00	↓
15	Dec. 31	Interest Expense	12,728.00				↓
16		Interest Payable		12,728.00		↑
17	31	Interest Expense	18,427.00				↓
18		Premium on Bonds Payable	2,948.00			↓
19		Cash		21,375.00	↓
20	31	Income Summary	136,485.00				↓
21		Interest Expense		136,485.00			↑
22	31	Bonds Payable	475,000.00			↓
23		Premium on Bonds Payable	23,584.00			↓
24		Loss on Redemption of Bonds	20,600.00				↓
25		Cash		519,184.00	↓

Considering the journal entries for both years, answer the following questions.

1.	What is the yearly payment amount required for the note payable? (Assume it is an installment note.)
2.	What is the interest rate on the note payable?
3.	Were the bonds in the entry on Dec. 31 of 20Y5 redeemed at maturity?
4.	You suspect there is an error in one of the bond redemption entries. Assuming that the amounts are correct, which entry is questionable? Why?
5.	Why do some bonds sell below face value?

6. Which of the following items are amortized? Check all that apply.

Redemption amount

Bonds

It depends on the face value of the bond

Future cash receipts

Contract rate of interest

Discounts

Premiums

Interest expenses

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