Use the Present Value and Future Value Tables Included in Appendix

question 34

Multiple Choice

Use the present value and future value tables included in Appendix 8 and on the textbook companion website.
-On January 1, 2012, Cabuki Corporation issued $500,000 of 10 percent, 10-year bonds at 88.5. Interest is payable on December 31. If the market rate of interest was 12 percent at the time the bonds were issued, how much was interest expense in 2012 (assuming Cabuki uses the effective-interest amortization method) ?

• A) $44,250
• B) $50,000
• C) $53,100
• D) $60,000

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Definitions:

Patents

Legal documents granting an inventor exclusive rights to produce, use, and sell an invention for a certain number of years.

Research And Development

A business or government activity that involves the study and creation of new products, services, or discoveries.

LRAC Curve

Long-Run Average Cost Curve, showing the lowest average cost at which a firm can produce any given level of output in the long term.

Natural Monopolist

A type of monopoly that occurs when a single firm can supply a product or service to an entire market at a lower cost than two or more firms could.