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