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Dilutive Securities, Conceptual mcq homework




Question;21. Convertible bonds;a. have;priority over other indebtedness.;b. are;usually secured by a first or second mortgage.;c. pay;interest only in the event earnings are sufficient to cover the interest.;d. may;be exchanged for equity securities.;22. The conversion of bonds is most commonly;recorded by the;a. incremental;method.;b. proportional;method.;c. market;value method.;d. book;value method.;23. When a bond issuer offers some form of;additional consideration (a ?sweetener?) to induce conversion, the sweetener is;accounted for as a(n);a. extraordinary;item.;b. expense.;c. loss.;d. none;of these.;S24. Corporations issue convertible debt for two;main reasons. One is the desire to raise;equity capital that, assuming conversion, will arise when the original debt is;converted. The other is;a. the;ease with which convertible debt is sold even if the company has a poor credit;rating.;b. the;fact that equity capital has issue costs that convertible debt does not.;c. that;many corporations can obtain financing at lower rates.;d. that;convertible bonds will always sell at a premium.;S25. 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;a. reflected;currently in income, but not as an extraordinary item.;b. reflected;currently in income as an extraordinary item.;c. treated;as a prior period adjustment.;d. treated;as an adjustment of additional paid-in capital.;S26. 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;a. reflected;currently in income, but not as an extraordinary item.;b. reflected;currently in income as an extraordinary item.;c. treated;as a prior period adjustment.;d. treated;as a direct reduction of retained earnings.;27. The conversion of preferred stock may be;recorded by the;a. incremental;method.;b. book;value method.;c. market;value method.;d. par;value method.;28. 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;a. additional;paid-in capital from stock warrants.;b. retained;earnings.;c. a;liability account.;d. premium;on bonds payable.;29. Proceeds from an issue of debt securities;having stock warrants should not be;allocated between debt and equity features when;a. the;market value of the warrants is not readily available.;b. exercise;of the warrants within the next few fiscal periods seems remote.;c. the;allocation would result in a discount on the debt security.;d. the;warrants issued with the debt securities are nondetachable.;30. 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.;P31. A;corporation issues bonds with detachable warrants. The amount to be recorded as;paid-in capital is preferably;a. zero.;b. calculated;by the excess of the proceeds over the face amount of the bonds.;c. equal;to the market value of the warrants.;d. based;on the relative market values of the two securities involved.;P32. The;distribution of stock rights to existing common stockholders will increase;paid-in capital at the;Date of Issuance Date of Exercise;of;the Rights of the;Rights;a. Yes Yes;b. Yes No;c. No Yes;d. No No;S33. The major;difference between convertible debt and stock warrants is that upon exercise of;the warrants;a. the;stock is held by the company for a defined period of time before they are;issued to the warrant holder.;b. the;holder has to pay a certain amount of cash to obtain the shares.;c. the;stock involved is restricted and can only be sold by the recipient after a set;period of time.;d. no;paid-in capital in excess of par can be a part of the transaction.;S34. Which of;the following is not a characteristic;of a noncompensatory stock option plan?;a. Substantially;all full-time employees may participate on an equitable basis.;b. The;plan offers no substantive option feature.;c. Unlimited;time period permitted for exercise of an option as long as the holder is still;employed by the company.;d. Discount;from the market price of the stock no greater than would be reasonable in an;offer of stock to stockholders or others.;35. 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;a. is;granted the option.;b. has;performed all conditions precedent to exercising the option.;c. may;first exercise the option.;d. exercises;the option.;36. Compensation expense resulting from a;compensatory stock option plan is generally;a. recognized;in the period of exercise.;b. recognized;in the period of the grant.;c. allocated;to the periods benefited by the employee's required service.;d. allocated;over the periods of the employee's service life to retirement.;37. The date;on which total compensation expense is computed in a stock option plan is the;date;a. of;grant.;b. of;exercise.;c. that;the market price coincides with the option price.;c. that;the market price exceeds the option price.;38. Which of the following is not a characteristic of a;noncompensatory stock purchase plan?;a. It;is open to almost all full-time employees.;b. The;discount from market price is small.;c. The;plan offers no substantive option feature.;d. All;of these are characteristics.;*39. Under the intrinsic value method;compensation expense resulting from an incentive stock option is generally;a. not;recognized because no excess of market price over the option price exists at;the date of grant.;b. recognized;in the period of the grant.;c. allocated;to the periods benefited by the employee's required service.;d. recognized;in the period of exercise.;*40. An executive compensation plan in which the;executive may receive compensation in cash, shares of stock, or a combination;of both, is known as ______________ plan.;a. a;nonqualified stock option;b. a;performance-type;c. a;stock appreciation rights;d. both;a performance-type and a stock appreciation rights;*41. A corporation should record no compensation;expense for which of the following types of executive compensation plans?;a. Stock;appreciation rights;b. Nonqualified;stock option plans;c. Incentive;stock option plans;d. Compensation;expense should be recorded for all of these.;*42. The payment to executives from a;performance-type plan is never based;on the;a. market;price of the common stock.;b. return;on assets (investment).;c. return;on common stockholders' equity.;d. sales.


Paper#48747 | Written in 18-Jul-2015

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