Assume that the notes to Pemberton Ltd.'s financial statements reported the following data on September 30, 2014:

Question:

NOTE E: LONG-TERM DEBT

5-percent debentures due 2033, net of unamortized discount of $223,162 (effective interest rate of 6.0 percent)............................................................................$1,776,838

Pemberton Ltd. amortizes the discount by the effective-interest method.

Required

1. Answer the following questions about Pemberton Ltd.'s long-term liabilities:

a. What is the maturity value of the 5-percent debentures?

b. What is the carrying amount of the 5-percent debentures at September 30, 2014?

c. What are Pemberton Ltd.'s annual cash interest payments on these debentures?

2. Prepare an amortization table through September 30, 2016, for the 5-percent debentures. Pemberton Ltd. pays interest annually on September 30.

3. Record the September 30, 2016, interest payments on the 5-percent debentures.

4. What is Pemberton Ltd.'s carrying amount of the 5-percent debentures at September 30, 2016, immediately after the interest payment?

Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...