Accounting Online Program Certification Practice Test

What amount of interest was paid by Crane plc in respect of its debentures during 20X5?

1. £40,000

2. £35,000

3. £45,000

4. £50,000

The correct answer is: £40,000

To determine the correct amount of interest paid by Crane plc for its debentures during the year 20X5, it is essential to understand how interest on debentures is typically calculated. Debentures usually pay interest based on a fixed percentage of the principal amount, often referred to as the nominal value or face value of the debenture. In this scenario, if the interest paid is stated to be £40,000, this figure may represent either the total interest expense for the year or the actual cash paid out towards interest payments. Given that the question asks specifically for the amount of interest paid, the £40,000 aligns with a situation where Crane plc has either consistently paid this amount as part of its debt servicing obligations or adheres to an established interest rate schedule on its debentures. To verify this figure, one would typically review Crane plc's financial records or notes regarding the terms of their debentures, including the interest rate and associated payment frequency. If, for instance, the total outstanding debentures were known alongside their interest rates, calculating the corresponding interest expense would directly support the figure of £40,000 as accurate. By understanding the underlying principles of interest paid on debentures and reviewing company financial statements