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Question
With the development of modern option pricing methods, the Accounting Principles Board would probably have reached the conclusion today that the conversion feature of convertible bonds
A. has no value.
B. has value.
C. has value, but should be ignored.
D. does not lend itself to these option pricing models.
Answer
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Related questions
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Decrease in accounts payable: $20,000
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Q:
Which of the following correctly describes U.S. GAAP accounting for convertible bonds and the implication of that requirement?
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Bonds convertible into 50,000 shares of common stock were issued on July 1, 2011; the bonds have been determined to be dilutive.
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Which of the following is not indicative of a complex capital structure?
A. Outstanding convertible bonds.
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D. Outstanding stock options.
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Assuming that the preferred stock is cumulative, and that there are no dividends in arrears, what is the maximum dividend that may be distributed to common shareholders at December 31, 2012?
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What is the owners' equity balance on December 31, 2012?
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A. Its focus is on the firm's net assets.
B. It is the prevailing view of GAAP.
C. Its focus is on owners' equity.
D. Whether creditors or shareholders provided the firm's assets is irrelevant.
Q:
By using the book value method to record the conversion of convertible bonds, managers are able to protect themselves from recording conversion losses.
Q:
SFAS No. 123 required companies to use the fair value approach when determining compensation expense pertaining to stock options.