In Most Cases, U

question 165

Multiple Choice

In most cases, U.S.GAAP requires firms to allocate the full issue price of Convertible Bonds or Convertible Preferred Stock

• A)to the bonds or preferred stock and none of the price to the conversion feature.
• B)to the bonds or preferred stock and the conversion feature based on fair values.
• C)to the bonds or preferred stock and the conversion feature based on the present value of future cash flows.
• D)to the bonds or preferred stock and the conversion feature based on the future value of present cash flows.
• E)to the price to the conversion feature and none to the bonds or preferred stock.

---

Definitions:

Fiduciary Duty

The responsibility to act in the best interests of another party, such as in financial matters or care, characterized by trust, reliance, and a duty of care.

Commission

A fee paid to an agent or employee for facilitating a sale or for performing a service.

Profit

The financial gain obtained when the revenues earned from business activities exceed the expenses, taxes, and costs associated with sustaining the activity.

Consent

Permission or assent to conduct that would otherwise constitute a tort such as assault and battery; can be expressed or implied; informed consent constitutes a defence to torts such as assault and battery.