FAR Test Bank 2024/2025 updated Questions And Answers 100% correct Verified

On December 1 of the current year, Bann Co. entered into an option contract to purchase 2,000 shares of Norta Co. stock for $40 per share (the same as the current market price) by the end of the next two months. The time value of the option contract is $600. At the end of December, Norta's stock was selling for $43, and the time value of the option is now $400. If Bann does not exercise its option until January of the subsequent year, which of the changes would reflect the proper accounting treatment for this transaction on Bann's December 31 year-end financial statements?Net income will increase by $5,800 FV increased $43 - $40 = $3 $3 x 2,000 = $6,000 Option now $6,000 + $400 = $6,400 The change in the FV of option was $6,400 - $600 = $5,800 Which of the following models for assigning values to options takes into account the volatility of stock prices?Black-Scholes model - Yes Lattice value model - Yes In a periodic inventory system which uses the FIFO cost flow method, the cost of goods available for sale is net purchases ...Plus the beginning inventory North, Inc. uses the equity method of accounting for its 50% investment in Mill Corp.'s common stock. During year 3, Mill reported earnings of $600,000 and paid dividends of $200,000. Assume that: (1) all undistributed earnings of Mill will be distributed as dividends in futue periods, (2) the dividends received from Mill are eligible for the 80% dividends received deduction, and (3) North's income tax rate is 30%. The chage in the amount of deferred income tax to be reported by North for year 3 is ...$12,000