Choose the Correct Option for Intermediate Accountancy Flashcards

A company estimates the fair value of SARs, using an option-pricing model, fora. share-based equity awards.b. share-based liability awards.c. both equity awards and liability awards.d. neither equity awards or liability awards.

An executive pays no taxes at time of exercise in a(an)a. stock appreciation rights plan.b. incentive stock option plan.c. nonqualified stock option plan. d. Taxes would be paid in all of these.

For stock appreciation rights, the measurement date for computing compensation is the datea. the rights mature.b. the stock’s price reaches a predetermined amount.c. of grant.d. of exercise.

Under the intrinsic value method, compensation expense resulting from an incentive stock option is generallya. not recognized because no excess of market price over the option price exists at the date of grant.b. recognized in the period of the grant.c. allocated to the periods benefited by the employee's required service.d. recognized in the period of exercise.

Which of the following is not a characteristic of a noncompensatory stock purchase plan?a. It is open to almost all full-time employees.b. The discount from market price is small.c. The plan offers no substantive option feature.d. All of these are characteristics.

The date on which total compensation expense is computed in a stock option plan is the datea. of grant.b. of exercise.c. that the market price coincides with the option price.d. that the market price exceeds the option price.

36. Compensation expense resulting from a compensatory stock option plan is generallya. recognized in the period of exercise.b. recognized in the period of the grant.c. allocated to the periods benefited by the employee's required service.d. allocated over the periods of the employee's service life to retirement.

35. 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 employeea. is granted the option.b. has performed all conditions precedent to exercising the option.c. may first exercise the option.d. exercises the option.

S34. 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.

S33. The major difference between convertible debt and stock warrants is that upon exercise of the warrants

P32. The distribution of stock rights to existing common stockholders will increase paid-in capital at the Date of Issuance Date of Exercise of the Rights of the Rightsa. Yes Yesb. Yes Noc. No Yesd. No No

29. Proceeds from an issue of debt securities having stock warrants should not be allocated between debt and equity features whena. 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.

P31. A corporation issues bonds with detachable warrants. The amount to be recorded as paid-in capital is preferablya. zero.b. calculated by the excess of the proceeds over the face amount of the bonds.c. equal to the market value of the warrants.d. based on the relative market values of the two securities involved.

30. Stock warrants outstanding should be classified asa. liabilities.b. reductions of capital contributed in excess of par value.c. assets.d. none of these.

21. Convertible bondsa. have priority over other indebtedness.b. are usually secured by a first or second mortgage.c. pay interest only in the event earnings are sufficient to cover the interest.d. may be exchanged for equity securities.