The date on which to measure the compensation element in a stock option granted to a corporate employee ordinarily is the date

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.


Answer: is granted the option

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.


Answer: Unlimited time period permitted for exercise of an option as long as the holder is still employed by the company.

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.


Answer: none of these

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt

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.


Answer: reflected currently in income, but not as an extraordinary item.

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.


Answer: the warrants issued with the debt securities are nondetachable

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.


Answer: expense