Chapter 16

Chapter 16 - SelfTest,Question1

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Self Test, Question 1
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The book value of convertible bonds is transferred to common stock and additional paid-in capital when they are converted.     At the time convertible bonds are converted into stock: the market value of the bonds is recorded as common stock. the face value of the bonds is recorded as common stock. a gain or loss should be recognized. the book value of the bonds is transferred to paid-in capital accounts. Self Test, Question 2 Both gains and losses are recognized when convertible debt is retired.     When convertible debt is retired: only gains on retirement are recognized.
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either a gain or a loss on retirement is recognized. neither gains nor losses are recognized. only losses on retirement are recognized. Self Test, Question 3 The preferred stock's par value and any additional paid-in capital is transferred to Common Stock and Additional Paid-in  Capital when preferred stock is converted.     When convertible preferred stock is converted into common stock: the par value of the preferred stock and any additional paid-in capital is transferred to Common Stock and Additional Paid-in  Capital. the par value of the preferred is recorded as common stock. the market value of the preferred is recorded as common stock. a gain or loss is recognized. Self Test, Question 4 All of the options are correct except to give bondholders the preemptive right to purchase stock.     The issuance of warrants arises under all of the following situations except to:
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give bondholders the preemptive right to purchase additional stock. give existing stockholders a preemptive right to purchase stock. provide compensation to executives. make different types of securities more attractive to new investors. Self Test, Question 5 The proceeds from the sale of debt with warrants should be allocated based on the aggregate fair market value of the bonds  and the warrants.     The proceeds from the sale of debt with detachable stock warrants should be allocated between the two securities based on  the: fair market value of the bonds. face value of the bonds and market value of the warrants. aggregate fair market value of the bonds and the warrants. face value of the bonds. Self Test, Question 6
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An allocation of the sales proceeds is only necessary for bonds issued with detachable warrants.     For which of the following securities is an allocation of the sales proceeds necessary? Convertible bonds.
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This note was uploaded on 07/27/2011 for the course ACCT 304 taught by Professor Hendren during the Summer '08 term at Strayer.

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Chapter 16 - SelfTest,Question1

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