Question

EXAn Fat the bej and a $5 mm urke ing rate I. Select the best answer (60 points) The conversion of bonds is most commonly recorded by the 1 gslain the mit entries eries: C fair v a. incremental method b. proportional method. c. market value method. d. book value method If a company offers additional considerations to convertible bondholders In order to encourage 2. conversion, it is called a(an): of end mont nsid mobi a. forced conversion. b. sweetener additional conversion. C. d end conversion. Corporations issue convertible debt for two main reasons. One is the desire to raise equity capital that, assuming conversion, will arise when the original debt is converted. The other is anef un s 8 3. a the ease with which convertible debt is sold even if the company has a poor credit rating b. the fact that equity capital has issue costs that convertible debt does not c. that many corporations can obtain debt financing at lower rates d. that convertible bonds will always sell at a premium. When convertible debt is retired by the issuer, any material difference between the cash acquisition 4. price and the carrying amount of the debt should be a reflected currently in income, but not as an extraordinary item. b. reflected currently in income as an extraordinary item. C treated as a prior period adjustment. d. treated as an adjustment of additional paid-in capital The conversion of preferred stock is recorded by the 5 a incremental method. b book value method. c market value method. d. par value method. When the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par 6 alue of the bonds and the fair market value of the warrants, the excess should be credited to a additional paid-in capital from stock warrants b. retained earnings. C a liability account