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

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


Answer: No Yes

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.


Answer: based on the relative market values of the two securities involved

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.

Answer: the holder has to pay a certain amount of cash to obtain the shares