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:

Debate

A formal discussion on a particular topic in a public meeting or legislative assembly, in which opposing arguments are put forward.

Fallacy of Relevance

The premise is logically irrelevant, or unrelated, to the conclusion.

Straw Man Fallacy

An opponent’s argument is distorted or misrepresented in order to make it easier to refute.

Equivocation

A key term in an argument changes meaning during the course of the argument.