Solutions to Selected Problems from the Text -- Chapter 14

Solutions to Selected Problems from the Text -- Chapter 14...

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COMMERCE 450 FALL 2011 SOLUTIONS TO SELECTED PROBLEMS FROM THE TEXT CHAPTER 14 SOLUTIONS ARE PROVIDED TO THE FOLLOWING PROBLEMS: P14-9 P14-11 P14-21 P14-24 P14-25 P14-9. Suggested solution: 2011 Aug 15 Dr. Cash 150,000 Cr. Liability for call options issued 150,000 (Proceeds equals $3.00/option) 2011 Dec 31 Dr. Liability for call options issued 25,000 Cr. Gain on call option issued (50,000 options × $2.50/option – $3.00/option) 25,000 2012 Mar 16 Dr. Liability for call options issued 125,000 Cr. Gain on call option issued ($150,000 – $25,000) 125,000 Since the options expire unexercised, Jarvis’s liability is extinguished. * * * * *
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P14-11. Suggested solution: IFRS requires use of the incremental method. In this case, the conversion right is allocated the residual amount. Dr. Cash (given) 6,540,000 Cr. Bonds payable (standalone market value) 6,200,000 Cr. Contributed surplus—conversion rights 340,000 * * * * * P14-21. Suggested solution: Dr. Compensation expense 20,000 Cr. Contributed surplus—stock options 20,000 (30,000 options × $2/option / 3 years) 2013 Dec 31 Same entry as above.
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