1. Similar to an investment firm\'s creates an a n another firm\'s shares, the a

Question

1. Similar to an investment firm's creates an a n another firm's shares, the acquisition of a company's 2. The SEC permits gains ens and losses on treasury stock transactions to be reported on the income statement. on 3. Options and warrants they are always considered dilutive. are critical to the earnings per share computation because compensation plans are focused on stock option awards so as to e possibility that the employees receiving the grants will feel they are 4. Share-based minimize th receiving potentially no value. 5. The real ized gain or loss for the difference between the carrying value and the cash rece flows through OCI. ived from selling an AFS security is excluded from net income since it The accounting for the conversio stock may involve recognition of a gain or loss if the par value of the preferred stock is different from the par value of the common stock. n to common stock of convertible preferred o.

Explanation / Answer

1 Answer :- False

Reason:- The issue of shares by a company provides the company with the ability to raise the capital necessary to conduct with the ability to raise the capital necessary to conduct it's business. It forms part of share capital and does not form part of an asset.

2. False

Reason:- when a company buys and sells it's own stock you might think there is a possibility of income that gains or losses when purchase and sales where prices are different. Although gains and losses are realized they are never recognised on the income statement because companies should not report current income or loss on transactions involving their own ownership.

3. True

Reason:- this mechanism can be either an option or conversion. If triggering the mechanism results in a decreased earnings per share for existing shareholders by increasing the total amount of outstanding shares then the instrument is said to be dilute security.

Some example of dilutivei securities include convertible preferred stocks convertible debt instruments, warrants and stock options.

4. False

5. False

Reason:- The gain or loss arising from the sale of AFS security forms part of net income as it is routed from the operating cash flows of an enterprise.

6. True

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