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:

Continuous Analysis

The ongoing assessment and examination of data or processes to inform decision-making and improve outcomes.

Value Chain

The sequence of activities an organization performs to design, produce, market, deliver, and support its product.

Periodic Analysis

The evaluation of business activities at regular, specified intervals to assess performance.

Exchange Rate

The value of one currency for the purpose of conversion to another, determining how much of one currency can be exchanged for another.