Table 15-7 Lex Enterprises Is Considering Alternative Ways of Raising Capital for Capital

question 20

Multiple Choice

Table 15-7
Lex Enterprises is considering alternative ways of raising capital for the purchase of a new factory. One alternative suggested by the controller is the issuance of bonds. After discussions with an underwriter, Lex decides to issue $5,000,000 of 7%, 10-year bonds dated May 1, 2017, with interest payment dates of November 1 and May 1. Lex's year end is December 31. Lex uses the effective-interest method of amortization.
-Refer to Table 15-7.Assuming the bonds are issued at 104 plus accrued interest on July 1,2017,the semiannual cash payment for interest on November 1,2017 will be:

• A) $175,000
• B) $116,667
• C) $182,000
• D) $121,333

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Definitions:

Self-Managed Teams

Groups of workers who are provided with the autonomy to plan, execute, and monitor their own tasks and performance.

Open-Book Management

A business strategy where financial and operational information is shared openly with employees to involve them in decision-making and to improve company performance.

Financial Statements

Formal records that outline the financial activities and position of a business, person, or other entity, typically comprising the balance sheet, income statement, and cash flow statement.

Bottom Line

Refers to the final net income or profit of a business after all expenses have been subtracted from revenues.