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Unformatted text preview: a) Classification issue b) Measurement issue 1. Incremental method 2. Proportional method II. Reporting at the time of conversion a) Converted by the holder 1. book value approach 2. fair value approach b) Induced early conversion 1. allocate the premium to debt retirement costs and share redemption costs. III. Reporting at the time of retirement 1 Handout #4 for Bus321-Intermediate Accounting II Professor: Yasheng Chen 4. Basic Characteristics of derivatives: d. e. f. 5. Derivative reporting principles 6. Types of options 7. Accounting for options a. Purchased call option Determining gain or loss of a purchased call option Date Intrinsic Value Gain/Loss Time Value Gain/Loss Option Price Jan. 2 $0-$400-$400 Mar. 31 $20,000 $20,000 $100-$300 $20,100 April. 1 $20,000 $0 $0-$100 $20,000 Total Gain= $19,600 =$20,000-$300-$100 b. Compensatory stock option plans c. Employee stock option plans 2...
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