If the Accountant Cannot Objectively Measure the Value of the Stock

question 123

Multiple Choice

If the accountant cannot objectively measure the value of the stock warrants separately from the value of the bond or preferred stock at date of issuance, the accountant credits

• A)the full purchase price to the bond or preferred stock and none of the price to the common stock warrant.
• B)95 percent of the purchase price to the bond or preferred stock and 5 percent of the price to the common stock warrant.
• C)90 percent of the purchase price to the bond or preferred stock and 10 percent of the price to the common stock warrant.
• D)85 percent of the purchase price to the bond or preferred stock and 15 percent of the price to the common stock warrant.
• E)80 percent of the purchase price to the bond or preferred stock and 20 percent of the price to the common stock warrant.

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Definitions:

Pure Solvent

A liquid substance that is able to dissolve other substances (solute), without any impurities or admixtures.

Solution

A homogeneous mixture composed of two or more substances in which the solute is completely dissolved in the solvent.

Molality

A measure of the concentration of a solute in a solution in terms of amount of substance per mass of solvent, specifically moles of solute per kilogram of solvent.

Molarity

A measure of the concentration of a solute in a solution, expressed as the number of moles of solute per liter of solution.