Chenard Company Is About to Issue $3,000,000 of 8-Year Bonds

question 106

Multiple Choice

Chenard Company is about to issue $3,000,000 of 8-year bonds paying a 12% interest rate with interest payable semiannually. The discount rate for such securities is 10%. Below are time value of money factors that Chenard uses to calculate compounded interest. $$\begin{array} { | l | c | c | r | r | } \hline & \begin{array} { c } 8 \text { periods, } \\10 \%\end{array} & \begin{array} { c } 16 \text { periods, } \\5 \%\end{array} & \begin{array} { c } 8 \text { periods, } \\12 \%\end{array} & \begin{array} { c } 16 \text { periods, } \\6 \%\end{array} \\\hline \text { Present value 1 } & 0.46651 & 0.45811 & 0.40388 & 0.39365 \\\hline \text { Future value 1 } & 2.14359 & 2.18287 & 2.47596 & 2.54035 \\\hline \text { Present value of an annuity of 1 } & 5.33493 & 10.83777 & 4.96764 & 10.10590 \\\hline \text { Future value of an annuity of 1 } & 11.43589 & 23.65749 & 12.29969 & 25.67253 \\\hline\end{array}$$ To the closest dollar, how much can Chenard expect to receive for the sale of these bonds?

• A) $3,193,390
• B) $2,293,710
• C) $3,325,130
• D) $5,400,000

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Definitions:

Equivalent Unit

A measurement used in process costing to equate the work done on units in progress to a number of fully completed units.

Weighted-Average Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the average cost of all units available.

Conversion Costs

Costs incurred to convert raw materials into finished goods, including direct labor and manufacturing overhead.

Equivalent Unit

A concept used in process costing that converts partially completed units into a smaller number of fully completed units to measure and allocate costs accurately.