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

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?

On 15 October 2016,Rural Sales has a debenture with balances as shown below. If Rural Sales wishes to redeem the debentures for $82 000,what will be the effect on the income statement?

The time value of money is based on the concept that money earns interest over time.

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.

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.)

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.)

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

Debentures are non-current liabilities issued to multiple lenders,usually in increments of $1 000.

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

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:

The reason people buy debentures is to:

When a company accrues interest payable on a long-term note at year-end,the interest payable must be shown as a non-current liability on the balance sheet,along with the long-term note payable balance.

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

On 1 January 2017,Finch Company issued $75,000 of five year debentures with a stated rate of 8%.The market rate at time of issue was 12%,so the debentures were discounted and sold for $74,401.Finch uses the effective-interest method of amortisation for debenture discount.Half-yearly interest payments are made on 30 June and 31 December of each year.Which of the following is the correct journal entry to record the first interest payment? (Round all amounts to the nearest dollar.)

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

The current portion of notes payable is the principal amount that will be paid within one year of the balance sheet date.

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

Instalment payments for mortgages are normally paid once per year.

Which of the following describes a serial debenture?

Accounts payable is always shown on the balance sheet in current liabilities.