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22 Cards in this Set

  • Front
  • Back

Convertible Bonds

May be exchanged for equity securities

The conversion of bonds is most commonly recorded by the

Book value method

When a bond issuer offers some form of additional consideration, the sweetener is accounted for as an


Corporations issue convertible debt for two main reasons. One is the desire to raise capital that, assuming conversion, will arise when the original debt is converted. The other is:

That many corporations can obtain financing at lower rates.

When convertible debt is retired by the issuer, any material difference between the acquisition price and the carrying amount of the debt should be

Reflected currently in income, but now as an extraordinary item.

The conversion of preferred stock into common requires that any excess of the par of the common shares issued over the carrying amount of the preferred being converted should be

Treated as a direct reduction of retained earnings.

The conversion of preferred stock may be recorded by the

Book value method

When the cash proceeds from a bond issues with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to

Premium on bonds payable

Proceeds from an issue of debt securities having stock warrants should not be allocated between debt and equity features when

The warrants issued with the debt securities are nondetachable

Stock warrants outstanding should not be classified as

Liabilities, reductions of capital contributed in excess of par value, or assets.

A corporation issues bonds with detachable warrants. The amount to be recorded as paid-in capital is preferably

Based on the relative market values of the two securities involved.

The distribution of stock rights to existing common stockholders will increase paid-in capital at the

Date of exercise of the rights and not the date of issuance of the rights.

The major difference between convertible debt and stock warrants is that upon exercise of the warrants

The holder has to pay a certain amount of cash to obtain the shares.

Which of the following is not a characteristic of a noncompensatory stock option plan?

Unlimited time period permitted for exercise of an option as long as the holder is still employed by the company.

The date on which to measure the compensation element in a stock option granted to a corporate employee ordinarily is the date on which the employee

Is granted the option

Compensation expense resulting from a compensatory stock option plan is generally

Allocated to the periods benefited by the employee's required service.

The date on which total compensation expense is computed in a stock option plan is the date

Of grant

What are some characteristics of noncompensatory stock purchase plans?

It is open to almost all full-time employees, the discount from market price is small, the plan offers no substantive option feature.

Under the intrinsic value method, compensation expense resulting from an inventive stock option is generally

Allocated to the periods benefited by the employee's required service.

For the stock appreciation rights, the measurement date of computing compensation is the date

Of exercise

An executive pays no taxes of time of exercise in an

Incentive stock option plan

A company estimates the fair value of SARs, using an option-pricing model, for

Share-based liability awards