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

question 105

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 107.44 when the market interest rate was 6%,and the company uses the effective interest method of amortization,the semiannual interest payment on November 1,2017,would include a:

• A) debit to interest expense for $175,000
• B) debit to discount on bonds payable for $13,840
• C) credit to premium on bonds payable for $13,840
• D) debit to interest expense for $161,160

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Definitions:

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A set of theorists in psychology who propose that psychological phenomena should be viewed as organized, structured wholes - a perspective focusing on the entirety of mind and behavior patterns.

Immanuel Kant

An influential German philosopher in the 18th century known for his work in epistemology, ethics, and aesthetics.

John Locke

A 17th-century English philosopher who is considered one of the first of the British empiricists; known for his theories of mind, knowledge, and politics.