31. Dakar Inc. has $3,000,000 (par value), 8% convertible bonds outstanding. Each $1,000 bond is convertible into thirty no par value common shares. The bonds pay interest on January 31 and July 31. On July 31, 2017, the holders of $900,000 worth of bonds exercised the conversion privilege. On that date the market price of the bonds was 105, the market price of the common shares was $36, the carrying value of the common shares was $18 and the Contributed Surplus—Conversion Rights account balance was $450,000. The total unamortized bond premium at the date of conversion was $210,000. Using the book value method, Dakar should record, as a result of this conversion,
a) no gain or loss.
b) a loss of $9,000.
c) other comprehensive income of $9,000.
d) a gain of $18,000.
32. Which of the following is NOT a characteristic of a non-compensatory employee stock option plan (ESOP)?
a) The plan is generally available to all employees.
b) There is only a small discount from the market price.
c) The plan requires the employee to pay an upfront premium.
d) The plan is accounted for as compensation expense.
33.Under a (non-compensatory) employee stock option plan (ESOP), when an option is sold to an employee, the employer debits Cash and credits
a) Common Shares.
b) Stock Option Payable.
c) Contributed Surplus – Stock Options.
d) Stock Option Revenue.
34.The date on which to measure the compensation element in a compensatory stock option plan (CSOP) is normally the date on which the employee
a) is granted the option.
b) has fulfilled all the conditions required to exercise the option.
c) may first exercise the option.
d) actually exercises the option.
35.Compensation expense resulting from a compensatory stock option plan (CSOP) is generally recognized
a) in the period of exercise.
b) at the grant date.
c) in the periods in which the employee performs the service.
d) over the periods of the employee's service life to retirement.
36.Hedging is the use of
a) derivatives or other instruments to increase returns.
b) derivatives or other instruments to offset risks.
c) debt to offset risks.
d) forward contracts.
37.A fair value hedge protects the company against
a) errors in valuation of derivative instruments.
b) a future transaction that has not yet been recognized.
c) an existing exposure related to an existing asset or liability.
d) fluctuations in exchange rates.
38.Hedge accounting is
b) mandatory if specified criteria are met.
c) optional until December 2018 and mandatory thereafter.
39.Using IFRS, hedge accounting allows the gain or loss on the hedge transaction to
a) be booked through net income.
b) be booked through other comprehensive income.
c) not be booked.
d) not be booked until the hedge closes.
40.If a company enters into a hedging contract to swap a floating interest rate for a fixed rate, by the end of the contract the interest rate incurred by the company will equal
a) the difference between the fixed and the floating rate.
b) the floating rate.
c) the fixed rate.
d) whichever rate is highest.
41.If a SAR is determined to be an equity instrument, it would be valued at
a) grant date and not revised at subsequent interim dates.
b) each interim date.
c) exercise date.
d) grant date and revalued at exercise date.
42.Compensation expense resulting from a performance-type plan is generally
a) determined at the measurement date.
b) recognized in the period of the grant.
c) allocated to the periods subsequent to the measurement date.
d) recognized in the period of exercise.
43.An executive compensation plan in which the executive may receive compensation in cash, shares, or a combination of both, is known as
a) a nonqualified shares option plan.
b) a performance-type plan.
c) a stock appreciation rights plan.
d) both a performance-type and a stock appreciation rights plan.
44.The date on which to measure the compensation in a stock appreciation rights plan is the
a) date of grant.
b) date of exercise.
c) end of each interim period up to the date of exercise.
d) date that the market price exceeds the option price.
45.The payment to executives from a performance-type plan is NEVERbased on the
a) market price of the common shares.
b) return on assets (investment).
c) return on common shareholders' equity.