Intermediate Accounting 2 questions and verified correct answers

Companies use the _____ _____ method when converting bonds. - correct answer Companies use the BOOK VALUE method when converting bonds. Can a gain or loss be recognized upon conversion of a debt to equity? - correct answer No If the journal entry to convert Preferred Stock into Common Stock winds up needing help on the debit side of the transaction, the plug would be to ________ _________ instead of _______. - correct answer If the journal entry to convert Preferred Stock into Common Stock winds up needing help on the debit side (PS less valuable than the CS) of the transaction, the plug would be to RETAINED EARNINGS instead of APIC. Stock Warrant - correct answer allows the holder to acquire shares of stock at a certain price What do Detachable Warrants involve? - correct answer a debt security and a warrant to purchase common stock Nondetachable warrants - correct answer do not require an allocation of proceeds. Record the entire process as debt Two methods of warrant allocation - correct answer 1. Proportional 2. Incremental Journal Entry if investors fail to exercise warrants - correct answer Debit: APIC-Stock Warrants Credit: APIC Expired Warrants Stock Right - correct answer existing stockholders have the right to purchase newly issued stocks to preserve their portion of company ownership Unrestricted stock option, comp. expense is based on - correct answer fair value (not market value) Restricted Stock Options at grant - correct answer Debit : Unearned Compensation Credit: CS, APIC-CS Journal Entry on Expiration of Stock Options - correct answer Debit: APIC-SO