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

question 115

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 were issued on May 1,2017,at 87 when the market interest rate was 9%,and the company uses the effective interest method of amortization,the December 31,2017,adjusting entry to accrue interest and record applicable amortization would include a:

• A) debit to interest expense for $58,333
• B) debit to bonds payable for $65,561.25
• C) credit to discount on bonds payable for $7,228
• D) credit to premium on bonds payable for $7,228

---

Definitions:

Micromanagement

A management style where a manager closely observes or controls the work of subordinates, often excessively.

Group Efficacy

The collective belief in a group's capability to achieve its goals.

Team-Based Organization

A type of organizational structure where activities and tasks are completed by groups of employees collaborating towards common goals.

Building Trust

The process of establishing confidence, reliability, and honesty between parties, crucial for healthy relationships and teamwork.