Question 1

The interest rate on which cash payments to debenture holders are based is the:

Accepted Answer

A) amortisation rate. 
B) discount rate. 
C) stated rate. 
D) market rate. 
A) amortisation rate. 
B) discount rate. 
C) stated rate. 
D) market rate.

Question 2

On 2 January 2014, Mahoney Sales issued $10 000 in debentures for $9 400. They were 5- year debentures with a stated rate of 4%, and pay half- yearly interest payments. Mahoney Sales uses the straight- line method to amortise the debenture discount. On 30 June 2014, when Mahoney makes the first payment to debenture holders, how much will they report as interest expense?

Accepted Answer

A) $260 
B) $200 
C) $400 
D) $60 
A) $260 
B) $200 
C) $400 
D) $60

Question 3

If a debenture is issued at a discount, it will sell for more than face value.

Accepted Answer

A) True 
 B)False

Question 4

A mortgage payable is a debt that is backed with a security interest in property.

Accepted Answer

A) True 
 B)False

Question 5

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 Current portion of long- term notes payable?

Accepted Answer

A) $4 800 
B) $48 000 
C) $400 
D) $43 200 
A) $4 800 
B) $48 000 
C) $400 
D) $43 200

Question 6

Using the present value tables, please compute the present value of $20 000 discounted back 5 periods at 4%.

Accepted Answer

A) $18 180 
B) $16 440 
C) $19 240 
D) $16 400 
A) $18 180 
B) $16 440 
C) $19 240 
D) $16 400

Question 7

The Amazing Widget Company issues $500 000 of 6%, 10- year debentures at 103 on 31 March 2014. The debenture pays interest on 31 March and 30 September. The market rate of interest on the issue date was 4%. Assume the company uses the straight- line method for amortisation. The journal entry to record the first interest payment on 30 September 2014 is a:

Accepted Answer

A) credit to Premium on debentures payable for $750. 
B) debit to Interest expense for $14 250. 
C) debit to Cash for $15 000. 
D) debit to Interest expense for $15 750. 
A) credit to Premium on debentures payable for $750. 
B) debit to Interest expense for $14 250. 
C) debit to Cash for $15 000. 
D) debit to Interest expense for $15 750.

Question 8

The balance in the Debentures payable account is a credit of $50 000. The balance in the Discount on debentures payable is a debit of $1 500. The balance sheet will report the debenture balance as
$48 500.

Accepted Answer

A) True 
 B)False

Question 9

The company will repay the principal amount of the debenture on the maturity date.

Accepted Answer

A) True 
 B)False

Question 10

Interest payable would normally be shown on the balance sheet in current liabilities.

Accepted Answer

A) True 
 B)False

The interest rate on which cash payments to debenture holders are based is the:

If a debenture is issued at a discount, it will sell for more than face value.

A mortgage payable is a debt that is backed with a security interest in property.

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 Current portion of long- term notes payable?

Using the present value tables, please compute the present value of $20 000 discounted back 5 periods at 4%.

The balance in the Debentures payable account is a credit of $50 000. The balance in the Discount on debentures payable is a debit of $1 500. The balance sheet will report the debenture balance as $48 500.

The company will repay the principal amount of the debenture on the maturity date.

Interest payable would normally be shown on the balance sheet in current liabilities.

The Role of Accounting in Business

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Partnerships

Companies: Share Capital and the Balance Sheet

Companies: Effects on Retained Earnings, Share Splits and Buy-Backs, and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Appendix

Filters

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

The interest rate on which cash payments to debenture holders are based is the:

If a debenture is issued at a discount, it will sell for more than face value.

A mortgage payable is a debt that is backed with a security interest in property.

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 Current portion of long- term notes payable?

Using the present value tables, please compute the present value of $20 000 discounted back 5 periods at 4%.

The balance in the Debentures payable account is a credit of $50 000. The balance in the Discount on debentures payable is a debit of $1 500. The balance sheet will report the debenture balance as $48 500.

The company will repay the principal amount of the debenture on the maturity date.

Interest payable would normally be shown on the balance sheet in current liabilities.

The Role of Accounting in Business

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Partnerships

Companies: Share Capital and the Balance Sheet

Companies: Effects on Retained Earnings, Share Splits and Buy-Backs, and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Appendix

Filters