Exam 12: Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

If a debenture's stated interest rate is higher than the market rate, which of the following is TRUE?

Which of the following is TRUE of a discount on debentures payable?

On 31 December 2013, Peterson Sales has a Debentures payable balance of $40 000 and a Discount on debentures payable of $2 100. On the balance sheet, how will this information be shown?

Which of the following describes a secured debenture?

Which of the following describes the term maturity date?

Compute the present value of a debenture. The principal amount is $50 000, the stated rate is 3%, and the term of the debenture is 6 years. The debenture pays interest half- yearly. At the time of issue, the market rate is 4%. Please compute the present value of the debenture at market rate using the present value tables.

Premium on debentures payable is considered to be additional interest expense of the company that issues the debenture.

The Australian Accounting Standards require that debenture premiums or discounts be amortised using the straight- line method.

The issue price of a debenture-whether it is sold at par, premium, or discount-has no effect on the required principal repayment at maturity.

The difference between a mortgage payable and a note payable is that notes payable are always long- term.

Blanding Company issues $1 000 000 of 8%, 10- year debentures at 98 on 28 February 2014. The debenture pays interest on 28 February and 31 August. The market rate of interest on the issue date was 10%. The journal entry to record the issue would include a:

If a company wishes to redeem debentures early, they may call the debentures if the debentures are callable, but they may not purchase them on the open market.

The balance in the Debentures payable account is a credit of $50 000. The balance in the Premium on debentures payable account is a credit of $900. How much is the debenture carrying amount?

Compute the present value of a debenture. The principal amount is $140 000, the stated rate is 9%, and the term of the debenture is 4 years. The debenture pays interest half- yearly. At the time of issue, the market rate is 8%. Please compute the present value of the debenture at market rate using the present value tables.

On 1 July 2013, Avery Services issued a 4% long- term note payable for $10 000. It is payable over a 5- year term in $2 000 principal instalments on 1 July of each year. Each yearly instalment will include both principal repayment of $2 000 and interest payment for the preceding one- year period. On 1 July 2014, after the first instalment payment is made, Avery will have to reclassify an additional $2 000 from long- term notes payable to the current portion of long- term notes payable.

On 1 January 2013, Diab Services issued $140 000 of 4- year debentures with a stated rate of 9%. The market rate at time of issue was 8%, so the debentures were issued with a premium and sold for $144 758. Diab uses the effective- interest method to amortise debenture premium. Half- yearly interest payments are made on 30 June and 31 December of each year. How much interest expense will be recorded when the first interest payment is made?

McDonald Sales prepared a debenture issue of $20 000 dated 1 January 2013. The debentures have a stated rate of 3% and a term of 6 years. The debenture issue was delayed, and the debentures were finally sold on 1 March 2013 at par. On 30 June 2013, the first half- yearly interest payment is made. How much is the total amount of interest expense McDonalds will record for the first half of 2013?

On 1 November 2013, EZ Products borrowed $48 000 on a 5%, 10- year note with annual instalment payments of $4 800 plus interest due on 1 November of each succeeding year. On 31 December 2014, what will the balance be in the account titled Long- term notes payable?

The balance in the Debentures payable is a credit of $50 00. The balance in the Premium on debentures payable is a credit of $900. The balance sheet will report the debenture balance as $49 100.

Which of the following occurs when a debenture's stated interest rate is higher than the market interest rate?