Accounting

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

Date of Issuance of the Rights - NO Date of Exercise of the Rights - YES

Which of the following is an advantage of a restricted-stock plan?

It creates new job opportunities in a company.

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.

Compensation expense resulting from a compensatory stock option plan 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 paid-in capital is preferably

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

The conversion of bonds is most commonly recorded by the

book value method.

The conversion of preferred stock is recorded by the

book value method.

An executive pays no taxes at the time of exercise in a(an)

incentive stock option plan.

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.

Convertible bonds

may be exchanged for equity securities.

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

not recognized if the market price does not exceed the option price at the date of grant.

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 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.

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 stock 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.