To Record Newly Issued Stock Shares Upon Conversion of Debt,managers

question 38

Multiple Choice

To record newly issued stock shares upon conversion of debt,managers most often choose the method known as the

• A)market value method.
• B)book value method.
• C)Black-Scholes method.
• D)par value methoD.

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Definitions:

Bonds

These are fixed-income investment products where an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.

Debt Instruments

Financial assets that represent a debtor's obligation to repay borrowed money or other forms of credit to the creditor according to stated terms.

Original Issue Discount

The difference between the par (face) value of a bond and the lower price at which it was originally sold, which must be reported as interest income over the life of the bond.

Tax-exempt Debt

Debt securities issued by state or municipal governments whose interest payments are exempt from federal income tax, and sometimes state and local taxes.