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

The debenture carrying amount is the balance in the debenture payable account subtracted from or added to the balance in either the discount or premium account.

On 1 January 2017,Zing Services issued $167,000 of six year debentures with a stated rate of 12%.The market rate at time of issue was 11%,so the debentures were issued with a premium and sold for $191,110.Zing uses the effective-interest method to amortise debentures 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? (Round to the nearest dollar. )

When a long-term note payable is issued,the entire amount should be initially recorded as a long-term note payable.

Blanding Company issues $1,020,000 of 8%,10-year debentures at 94 on 28 February 2017.The debentures pay interest on 28 February and 31 August.On 31 August 2017,how much cash did Blanding pay out to investors? (Round to the nearest dollar. )

On 1 November 2016,Archangel Services issued $301,000 of 5-year debentures with a stated rate of 15%.The debentures were sold at par,and Archangel makes semiannual payments on 30 April and 31 October.At 31 December 2016,Archangel made an adjusting entry to accrue interest at year-end.No further entries were made until 30 April 2017,when the first payment was sent out.How much interest expense was recorded for the period of 1 January to 30 April 2017? (Round to the nearest dollar. )

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 balance in the Debentures payable account is a credit of $50 000.The balance in the Discount on debentures payable account is a debit of $1 500.The debenture carrying amount is $51 500.

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

On 1 January 2017,Carter Sales issued $25,000 in debentures for $22,300.They were eight year debentures with a stated rate of 11% and pay semiannual interest.Carter Sales uses the straight-line method to amortise the debenture discount.After the second interest payment on 31 December 2017,what was the debenture carrying amount? (Round to the nearest dollar. )

On 1 June 2017,Smith Services issued $33,000 of 7% debentures that mature in five years.They were sold at a premium,for a total of $34,375.The debentures pay semiannual interest payments on 30 June and 31 December of each year.On 31 December 2017,how much is the total amount paid to investors?

On 1 December 2017,Fine Products borrowed $84,000 on a 5%,10-year note with annual instalment payments of $8400 plus interest due on 1 December of each succeeding year.Which of the following describes the first instalment payment made on 1 December 2018?

When a long-term note payable that requires annual instalment payments is initially recorded,it is first recorded as a long-term note payable.Then,at the same date,a second entry is made to reclassify the current portion.

A debenture is sold for an amount less than its face value.Which of the following statements would explain why?

On 1 December 2016,Fine Products borrowed $96,000 on a 8%,8-year note with annual instalment payments of $12,000.00 plus interest due on 1 December of each succeeding year.On 1 December,the principal amount was initially recorded as Long-term notes payable.What amount of the note payable will be shown as current portion of Long-term notes payable on the balance sheet as of 31 December 2016?

Cases Company issues $802,000 of 8%,10-year debentures on 31 March 2017.The debentures pay interest on 31 March and 30 September.Which of the following statements is true?

The Cases Company issues $800 000 of 7%,10-year debentures on 31 March 2016.The debenture pays interest on 31 March and 30 September.Which of the following statements is TRUE?

When a debenture is sold,the selling price is generally equivalent to the present value of the debenture payments.

On 1 January 2017,Carter Sales issued $17,000 in debentures for $20,800.They were eight year debentures with a stated rate of 12% and pay semiannual interest.Carter Sales uses the straight-line method to amortise the debenture premium.After the first interest payment on 30 June 2017,what was the debenture carrying amount? (Round to the nearest dollar. )

On 31 December 2016,Clark Sales has a Debentures payable balance of $93,000 and a Discount on debentures payable of $6350.On the balance sheet,how will this information be shown?

If a company issues a debenture in-between interest payments,the company can pay a prorated portion of the interest payment on the regular payment date.