ACCT 3312 Ch 16
The distribution of stock rights to existing common stockholders will increase APIC at the Date of Issuance | Date of Exercise
No | Yes
Compensation expense resulting from a compensatory stock option plan is generally
allocated to the periods benefited by the employee's required service
Under the intrinsic value method, compensation expense resulting from an incentive stock option is generally
allocated to the periods benefited by the employee's required service
A corporation issues bonds with detachable warrants. The amount to be recorded as APIC is preferably
based on the relative market values of the two securities involved
The if-converted method of computing earnings per share data assumes conversion of convertible securities as of the
beginning of the earliest period reported (or at the time of issuance, if later)
The conversion of preferred stock may be recorded by the
book value method
Stock warrants outstanding should be classified as a)liabilities b) reductions of capital contributed in excess of par value c) assets d) none of these
d
In determining diluted earnings per share, dividends on non-convertible cumulative preferred stock should be
deducted from net income whether declared or not
An executive pays no taxes at time of exercise in an
incentive stock option plan
The date on which to measure the compensation element in a stock option granted to a corporate employee is the date on which the employee
is granted the option
For stock appreciation rights, the measurement date for computing compensation is the date
of exercise
When the cash proceeds from a bond issued 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
When computing diluted earnings per share, convertible securities are
recognized only if they are dilutive
When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be
reflected currently in income, but not as an extraordinary item
A company estimates the fair value of SARs using an option pricing model for
share-based liability awards
Characteristics of a non-compensatory stock option plan
substantially all full time employees may participate on an equitable basis, the plan offers no substantive option feature, discount from the market price of the stock no greater than would be reasonable in an offer of stock to stockholders or others
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
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
The conversion of preferred stock into common requires that any excess of the par value of the common shares issued over the carrying amount of the preferred being converted should be
treated as a direct reduction of retained earnings