Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

On 1 May 2017,Metro Company has debentures with balances as shown below. $\begin{array}{l|r}
{\text { Debentures payable }} \
\hline & 50000
\end{array}$ $\quad\quad\begin{array}{r|}
{\text { Discount on debentures }}& \
\hline 1140
\end{array}$ If Metro redeems the debentures for $52 000,what will be the effect on the income statement?

Accepted Answer

A) There will be sales revenue of $3 140. 
B) There will be a gain on redemption of $3 140. 
C) There will be a loss on redemption of $3 140. 
D) There will be no effect on profit. 
A) There will be sales revenue of $3 140. 
B) There will be a gain on redemption of $3 140. 
C) There will be a loss on redemption of $3 140. 
D) There will be no effect on profit.

Question 3

On 1 January 2017,Carter Sales issued $39,000 in debentures for $20,700.They were six year debentures with a stated rate of 9% and pay semiannual interest.Carter Sales uses the straight-line method to amortise the Debentures discount.On 30 June 2017,when Carter makes the first payment to investors,how much will they report as Interest expense? (Round to the nearest dollar. )

Accepted Answer

A) $1525 
B) $37,185 
C) $1755 
D) $3280 
A) $1525 
B) $37,185 
C) $1755 
D) $3280

Question 4

Blanding Company issues $1,181,000 of 8%,10-year debentures at 96 on 28 February 2017.The debentures pay interest on 28 February and 31 August.The journal entry to record the issue would include a:

Accepted Answer

A) credit to Discount on debentures payable for $47,240 
B) debit to Cash for $1,181,000 
C) debit to Cash for $1,133,760 
D) credit to Debentures payable for $1,133,760 
A) credit to Discount on debentures payable for $47,240 
B) debit to Cash for $1,181,000 
C) debit to Cash for $1,133,760 
D) credit to Debentures payable for $1,133,760

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

Which of the following statements is TRUE about a debenture that is issued at a discount?

Accepted Answer

A) It will be sold for less than the face value. 
B) Its interest rate is higher than the prevailing market rate. 
C) It will be sold at par. 
D) It will repay principal at less than the face value. 
A) It will be sold for less than the face value. 
B) Its interest rate is higher than the prevailing market rate. 
C) It will be sold at par. 
D) It will repay principal at less than the face value.

Question 8

On 1 June 2017,Smith Services issued $38,000 of 10% debentures that mature in five years.They were sold at par.The debentures pay semiannual interest payments on 30 June and 31 December of each year.On 31 December 2017,how much is the total interest payments made to investors?

Accepted Answer

A) $1266.67 
B) $3800.00 
C) $950.00 
D) $1900.00 
A) $1266.67 
B) $3800.00 
C) $950.00 
D) $1900.00

Question 9

The time value of money is based on which of the following concepts?

Accepted Answer

A) The concept that money can be converted into other currencies over time 
B) The concept that money loses its purchasing power over time 
C) The concept that money becomes obsolete over time 
D) The concept that money earns income over time 
A) The concept that money can be converted into other currencies over time 
B) The concept that money loses its purchasing power over time 
C) The concept that money becomes obsolete over time 
D) The concept that money earns income over time

Question 10

The reason people buy debentures is to:

Accepted Answer

A) reduce their income taxes. 
B) receive dividend payments. 
C) earn interest. 
D) save money. 
A) reduce their income taxes. 
B) receive dividend payments. 
C) earn interest. 
D) save money.

Question 11

GST clearing would normally be shown on the balance sheet in non-current liabilities.

Accepted Answer

A) True 
 B)False

Question 12

On 1 January 2017,Bratios Company purchases equipment and signs a 6-year mortgage payable for $93,000 at 15%.The mortgage will be paid in equal annual instalments of $24,574,beginning 1 January 2018.Calculate the portion of principal amount paid on the third instalment.(Round to the nearest dollar. )

Accepted Answer

A) $14,050 
B) $10,524 
C) $24,574 
D) $13,950 
A) $14,050 
B) $10,524 
C) $24,574 
D) $13,950

Question 13

Which of the following statements about callable debentures is true?

Accepted Answer

A) Callable debentures give the issuer the flexibility to pay off the debentures whenever it benefits the company. 
B) Whether the debentures are called or purchased,the journal entry is the same. 
C) The call price is usually 100 or a few percentage points above maturity value to provide an incentive to the debenture holder. 
D) All of the above 
A) Callable debentures give the issuer the flexibility to pay off the debentures whenever it benefits the company. 
B) Whether the debentures are called or purchased,the journal entry is the same. 
C) The call price is usually 100 or a few percentage points above maturity value to provide an incentive to the debenture holder. 
D) All of the above

Question 14

On 1 January 2017,Carter Sales issued $27,000 in debentures for $33,800.They were eight year debentures with a stated rate of 14% and pay semiannual interest.Carter Sales uses the straight-line method to amortise the debenture premium.On 30 June 2017,when Carter makes the first payment to investors,how much will they report as Interest expense? (Round to the nearest dollar. )

Accepted Answer

A) $5335 
B) $1480 
C) $1890 
D) $1465 
A) $5335 
B) $1480 
C) $1890 
D) $1465

Question 15

Premium on debentures payable is spread over the term of the debentures and reduces total interest expense.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) The debenture will be issued at par. 
B) The debenture will be issued at a discount. 
C) The debenture will be issued at maturity value. 
D) The debenture will be issued at a premium. 
A) The debenture will be issued at par. 
B) The debenture will be issued at a discount. 
C) The debenture will be issued at maturity value. 
D) The debenture will be issued at a premium.

Question 17

Trek Company signed a 11%,10-year note for $158,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is interest expense? (Round to the nearest dollar. )

Accepted Answer

A) $1448 
B) $1252 
C) $15,867 
D) $30,547 
A) $1448 
B) $1252 
C) $15,867 
D) $30,547

Question 18

On 31 December 2016,Lopez Sales has a Debentures payable balance of $75,000 and a Premium on debentures payable of $6000.On the balance sheet,how will this information be shown?

Accepted Answer

A) $75,000 
B) $75,000 less one-tenth of $6000 for a net balance of $74,400 
C) $75,000 less premium of $6000 for a net balance of $69,000 
D) $75,000 plus a premium of $6000 for a net balance of $81,000 
A) $75,000 
B) $75,000 less one-tenth of $6000 for a net balance of $74,400 
C) $75,000 less premium of $6000 for a net balance of $69,000 
D) $75,000 plus a premium of $6000 for a net balance of $81,000

Question 19

The balance in the Debentures payable account is a credit of $67,000.The balance in the Discount on debentures payable account is a debit of $2150.How much is the debentures' carrying amount?

Accepted Answer

A) $2150 
B) $67,000 
C) $69,150 
D) $64,850 
A) $2150 
B) $67,000 
C) $69,150 
D) $64,850

Question 20

Trek Company signed a 9%,10-year note for $151,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is principal? (Round to the nearest dollar. )

Accepted Answer

A) $15,283 
B) $4267 
C) $1510 
D) $1567 
A) $15,283 
B) $4267 
C) $1510 
D) $1567

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

On 1 May 2017,Metro Company has debentures with balances as shown below. Debentures payable 50000 Discount on debentures 1140 If Metro redeems the debentures for $52 000,what will be the effect on the income statement?

Blanding Company issues $1,181,000 of 8%,10-year debentures at 96 on 28 February 2017.The debentures pay interest on 28 February and 31 August.The journal entry to record the issue would include a:

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

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

Which of the following statements is TRUE about a debenture that is issued at a discount?

On 1 June 2017,Smith Services issued $38,000 of 10% debentures that mature in five years.They were sold at par.The debentures pay semiannual interest payments on 30 June and 31 December of each year.On 31 December 2017,how much is the total interest payments made to investors?

The time value of money is based on which of the following concepts?

The reason people buy debentures is to:

GST clearing would normally be shown on the balance sheet in non-current liabilities.

Which of the following statements about callable debentures is true?

Premium on debentures payable is spread over the term of the debentures and reduces total interest expense.

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

Trek Company signed a 11%,10-year note for $158,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is interest expense? (Round to the nearest dollar. )

On 31 December 2016,Lopez Sales has a Debentures payable balance of $75,000 and a Premium on debentures payable of $6000.On the balance sheet,how will this information be shown?

The balance in the Debentures payable account is a credit of $67,000.The balance in the Discount on debentures payable account is a debit of $2150.How much is the debentures' carrying amount?

Trek Company signed a 9%,10-year note for $151,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is principal? (Round to the nearest dollar. )

The Role of Accounting in Decision Making

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: Formation and Shareholders Equity

Companies: Capital Management and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

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

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

On 1 May 2017,Metro Company has debentures with balances as shown below. Debentures payable 50000 Discount on debentures 1140 If Metro redeems the debentures for $52 000,what will be the effect on the income statement?

Blanding Company issues $1,181,000 of 8%,10-year debentures at 96 on 28 February 2017.The debentures pay interest on 28 February and 31 August.The journal entry to record the issue would include a:

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

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

Which of the following statements is TRUE about a debenture that is issued at a discount?

On 1 June 2017,Smith Services issued $38,000 of 10% debentures that mature in five years.They were sold at par.The debentures pay semiannual interest payments on 30 June and 31 December of each year.On 31 December 2017,how much is the total interest payments made to investors?

The time value of money is based on which of the following concepts?

The reason people buy debentures is to:

GST clearing would normally be shown on the balance sheet in non-current liabilities.

Which of the following statements about callable debentures is true?

Premium on debentures payable is spread over the term of the debentures and reduces total interest expense.

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

Trek Company signed a 11%,10-year note for $158,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is interest expense? (Round to the nearest dollar. )

On 31 December 2016,Lopez Sales has a Debentures payable balance of $75,000 and a Premium on debentures payable of $6000.On the balance sheet,how will this information be shown?

The balance in the Debentures payable account is a credit of $67,000.The balance in the Discount on debentures payable account is a debit of $2150.How much is the debentures' carrying amount?

Trek Company signed a 9%,10-year note for $151,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is principal? (Round to the nearest dollar. )

The Role of Accounting in Decision Making

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: Formation and Shareholders Equity

Companies: Capital Management and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

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