The Buyer of an Option Contract

question 8

Multiple Choice

The buyer of an option contract:

• A) Receives the option premium in exchange for an obligation to either buy or sell an underlying asset.
• B) Pays an option premium in exchange for a right to buy or sell an underlying asset during a specified period of time.
• C) Pays the strike price at the time the option is purchased and in exchange receives the right to exercise the option at a time of their choosing.
• D) Receives the option premium in exchange for guaranteeing the purchase or sale of an underlying asset if called upon to do so.
• E) Pays the option premium in exchange for receiving the strike price at a later date.

Identify and account for contingent consideration in a business combination.

Determine the effects of business combinations on consolidated cash, receivables, inventory, equipment, buildings, long-term liabilities, and retained earnings.

Evaluate and record stock issuance and related costs in business combination transactions.

Understand the treatment and impact of additional paid-in capital in business combinations.