How Would the Exercise of an Option, That Was Part

question 54

Multiple Choice

How would the exercise of an option, that was part of an initial compound instrument, be recorded?

• A)Common stock is recorded at an amount equal to the fair value of the options at date of conversion.
• B)Common stock is recorded at an amount equal to the price determined by the Black-Sholes model.
• C)Common stock is recorded at an amount equal to the market price of the shares on conversion date.
• D)Common stock is recorded at an amount equal to the cash received plus the contributed surplus initially recorded.

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Definitions:

Glycogen

A complex carbohydrate stored in the liver and muscles, which serves as a primary form of energy storage in the body.

Starch

A carbohydrate consisting of a large number of glucose units, serving as a major energy source in the diet.

Monosaccharides

The simplest form of carbohydrates, consisting of single sugar molecules like glucose and fructose.

Fructose

A simple sugar found in honey and fruits that is sweeter than glucose and often used as a sweetener.