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 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 ↑ 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. 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?
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
| 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
|
|
|
↑
|
| 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. | 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 |
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