Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 16: 12Q (page 874)

What date or event does the profession believe should be used in determining the value of a stock option? What arguments support this position?

Short Answer

Expert verified

The profession recommends that fair value of a stock option be up in the air on the date on which the option is conceded to a particular individual.

It is the value of the option at the grant date, rather than the grantor's conclusive gain or loss on the monetary exchange, which for the end goal of accounting includes anything the grantor hopes to pay.

Step by step solution

01

The date norms regarding valuation of stock option to be followed 

The profession believes that the date or event should be used in fair value of a stock option. It is a reference to the assessed worth of an organization's stock that are recorded on an organization's financial statement.

02

The argument that will support the above statement is

On the date the option is conceded, the corporation foregoes the alternative of selling shares at the then common price. Market price on the date of grant might be ventured to be the worth which the employer had as a top priority. It is the value of the option at the date of grant, rather than the grantor's definitive gain or loss on the financial exchange, which for accounting purposes comprises anything the grantor expects to pay.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Tomba Corporation had 300,000 shares of common stock outstanding on January 1, 2017. On May 1, Tomba issued 30,000 shares. (a) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued for cash. (b) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued in a stock dividend.

Discuss the similarities and the differences between convertible debt and debt issued with stock warrants.

Bridgewater Corp. offered holders of its 1,000 convertible bonds a premium of \(160 per bond to induce conversion into shares of its common stock. Upon conversion of all the bonds, Bridgewater Corp. recorded the \)160,000 premium as a reduction of paid-in capital. Comment on Bridgewater’s treatment of the $160,000 “sweetener.”

(Conversion of Bonds) Vargo Company has bonds payable outstanding in the amount of \(500,000, and the Premium on Bonds Payable account has a balance of \)7,500. Each \(1,000 bond is convertible into 20 shares of preferred stock of parvalue of \)50 per share. All bonds are converted into preferred stock.

How is antidilution determined when multiple securities are involved?
See all solutions

Recommended explanations on Business Studies Textbooks

Organizational Behavior

Read Explanation

Business Case Studies

Read Explanation

Human Resources

Read Explanation

Intermediate Accounting

Read Explanation

Strategic Analysis

Read Explanation

Managers

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free