A Company Issues 8% Bonds with a Par Value of $40,000

question 50

Multiple Choice

A company issues 8% bonds with a par value of $40,000 at par on January 1. The market rate on the date of issuance was 7%. The bonds pay interest semiannually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is:

• A) $3,200.
• B) $1,400.
• C) $0.
• D) $1,600.
• E) $2,800.

---

Definitions:

Budgeted Selling Price

The anticipated price at which a product is expected to be sold, as determined during the budgeting process.

Raw Material Purchases

Costs associated with buying materials that are directly used in the production of goods.

Credit Sales

Sales transactions in which the customer is allowed to pay for goods or services at a later date, creating accounts receivable for the seller.

Cash Disbursements

The total amount of cash payments made by a business, including expenses, purchases, and debt payments.