INTERMEDIATE ACCOUNTING VOLUME 2
8TH CANADIAN EDITION BEECHY
DAVIDSON-CONROD FARRELL MCLEOD-
DICK TOMULKA SEVEL SOLUTION
MANUAL PRACTICE SCRIPT UPDATED
2026 TESTED SOLUTIONS
⫸ Dilutive securities Answer: Convertible securities as well as options,
warrants, and other securities that reduce EPS
⫸ Convertible bonds Answer: bonds that can be changed into other
corporate securities during some specified period of time after issuance.
Liabilities
⫸ Recording convertible bonds at date of issue Answer: none of the
proceeds are recorded as equity, companies amortize to the maturity date
any discount or premium that results from the issuance of convertible
bonds
⫸ Recording at time of conversion Answer: using the book value
method, securities exchanged for the bond at the carrying amount of the
bond.
" since at the date of issuance, there is an agreement to pay the stated
amount of cash at maturity, no loss or gain is recognized
, ⫸ Induced conversions Answer: When the issure wishes to encourage
coversion of debt in order to reduce interest cost or improve Debt/equity
ratio. they can offer additional consideration (cash or common stock)
called a sweetner
⫸ How to record sweetners Answer: additional compensations are
recorded as an expense to the current period and not as a reduction of
equity or as an extrodinary item
⫸ Retirement of convertible debt Answer: report differences between
the cash acquistion price of debt and its carrying amount in current
income as a gain or loss
⫸ Convertible preferred stock Answer: includes an option for the holder
to convert the shares into a fixed number of common stock. part of
stockholders equity
⫸ Accounting for converitble preferred stock Answer: book value
method: debits preferred stock and any related PIC in excess of par -
preffered. and it credits common stock and PIC in excess of par -
common stock. different when par value exceeds book: then you debit
retained earnings for difference. (because it is considered additional
return)
⫸ Warrants Answer: certificates entititling the holder to acquire shares
of stock at a certain price within a stated period. ( become common
stock when exercised and usually have a dilutive efffect)
8TH CANADIAN EDITION BEECHY
DAVIDSON-CONROD FARRELL MCLEOD-
DICK TOMULKA SEVEL SOLUTION
MANUAL PRACTICE SCRIPT UPDATED
2026 TESTED SOLUTIONS
⫸ Dilutive securities Answer: Convertible securities as well as options,
warrants, and other securities that reduce EPS
⫸ Convertible bonds Answer: bonds that can be changed into other
corporate securities during some specified period of time after issuance.
Liabilities
⫸ Recording convertible bonds at date of issue Answer: none of the
proceeds are recorded as equity, companies amortize to the maturity date
any discount or premium that results from the issuance of convertible
bonds
⫸ Recording at time of conversion Answer: using the book value
method, securities exchanged for the bond at the carrying amount of the
bond.
" since at the date of issuance, there is an agreement to pay the stated
amount of cash at maturity, no loss or gain is recognized
, ⫸ Induced conversions Answer: When the issure wishes to encourage
coversion of debt in order to reduce interest cost or improve Debt/equity
ratio. they can offer additional consideration (cash or common stock)
called a sweetner
⫸ How to record sweetners Answer: additional compensations are
recorded as an expense to the current period and not as a reduction of
equity or as an extrodinary item
⫸ Retirement of convertible debt Answer: report differences between
the cash acquistion price of debt and its carrying amount in current
income as a gain or loss
⫸ Convertible preferred stock Answer: includes an option for the holder
to convert the shares into a fixed number of common stock. part of
stockholders equity
⫸ Accounting for converitble preferred stock Answer: book value
method: debits preferred stock and any related PIC in excess of par -
preffered. and it credits common stock and PIC in excess of par -
common stock. different when par value exceeds book: then you debit
retained earnings for difference. (because it is considered additional
return)
⫸ Warrants Answer: certificates entititling the holder to acquire shares
of stock at a certain price within a stated period. ( become common
stock when exercised and usually have a dilutive efffect)
