What is the fair value option? Where do companies thatelect the fair value option report unrealized holdinggains and losses?

Q: Why is the return associated with common stock referred to as a residual claim? Contrast this kind…

A: Common stock holders are the owners of the business. Profits earned by the company will be the…

Q: Explain how to Adjust Trading Security Investments to Fair Value.

A:

Q: What is the effect of a company electing the fair value option with respect to an investment that…

A: Equity method: Equity method is the accounting method used for accounting equity investments which…

Q: What are the advantages of using restricted stock to compensateemployees?

A: Restricted stock are the shares of a company, which is issued to its employees, but not entirely…

Q: What are the issues with the book value and liquidation value per share approach?

A: Bok value per share measures the book value of the firm per share and represent the minimum value of…

Q: Why do firms hedge their risk and what determines the choice of contract for hedging?

A: Hedging is a risk management approach that involves acquiring an opposing position in a comparable…

Q: How are unrealized gains/losses on trading securities recorded?

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Q: What is the exposure to risk associated with a firm commitment to sell inventory that a fair value…

A:

Q: What is the effect of a company electing the fair value option with respect to a held-to-maturity…

A: Held-to-maturity security: The debt securities which are held by the investor with an intent to hold…

Q: Why are holding gains and losses treated differently for trading securities and securities…

A:

Q: GW Underwriters retains the difference between its buying price and its offering price on new…

A: Underwriters are large financial institutions such as investment banks, insurance companies, banks,…

Q: what is the fair value option? explain how the use of fair value option reflect application of the…

A: Fair Value option is that the board has taken an additional step of giving companies the option to…

Q: options contracts

A: An option contract illustrates a two-party agreement that authorises a transaction on a certain…

Q: The buyer of a Put Option has the right but not the obligation to sell the underlying stock. True…

A: A put option is a derivative contract giving the purchaser/owner the right, but not the obligation,…

Q: The seller of a put option is not necessarily the seller of the underlying asset. Select one: O True…

A: Put options are vital financial derivatives which provide the right to sell the asset at the…

Q: What are Nike’s choices in accounting for the share repurchases?

A:

Q: In what situation should a firm split its stock?

A: Firms generally split the stock when the price of the share becomes too high or exceeds the level…

Q: Does the if-converted assumption apply only to diluted earnings per share? O A. The if-converted…

A: If-converted assumption is used to calculate value of converted debenture or preference share,if…

Q: How does a dividend payment impact the option price?

A: The option price(call and put) is impacted by the new information about the announcement of the…

Q: When an acquirer chooses between cash offer or stock offer, which of the followings is the least…

A: Acquisition refers to obtaining the other company wholly or partially by paying the cash…

Q: The fair value option allows a company to report most financial instruments at fair value at each…

A: Fair value option is one of the option available to the company to value its financial instruments…

Q: Are exchange-listed options adjusted for the payment of an ordinary dividend? If so, what about the…

A: Detailed answer below

Q: How are shares issued at full market value treated differently from rights issues? Explain why it…

A: Destitute organizations will move to rights problems to fund-raise once they actually would like it.…

Q: What price per share will you have to reach on the B Round to avoid the Anti-Dilution clause of the…

A: The anti-dilution clause in the organization ensures the safety and protection of the investors…

Q: Under which circumstances can the speculator gain a profit and what is the risk of carry trades?

A: The big risk in a carry trade is the uncertainty of exchange rates. Using the example above, if the…

Q: Is share dividend payable a current or a non current liability? Explain your answer.

A: The dividend is payable to shareholders on a number of shares they hold as of the date of…

Q: how a firm might use a commodity derivative to reduce risk in its business? please include a…

A: In the world of derivatives, options etc. commodity derivatives are an important concept.…

Q: Explain how to Adjust Equity Investments to Fair Value.

A: Fair value method is used when a company buys stock of another company but the ownership stake is…

Q: Compensation expense must be adjusted during the service period to reflect changes in the fair value…

A: Compensation costs are the costs that an employer must repay to an employee as a benefit when the…

Q: Stock appreciation right would normally be settled through

A: Second option is wrong because stock appreciation right is not settled through issue of share…

Q: If a stock’s market value exceeds its book value, then the stock is overpriced. Do you agree?…

A: Market value depends on a lot of factors such as 1. Potential future earnings 2. Non Tangibles which…

Q: How is the adjustment to fair value recorded differently for a cash flow hedge versus a fair value…

A: Hedge Hedge is simply called financial instrument which can be reduce the mitigation of risk which…

Q: What is the purpose of a fair value hedge?

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Q: what is the essential feature of a forward contract that makesa futures contract a type of forward…

A: Hello. Since your question has multiple parts, we will solve the first question for you. If you want…

Q: Many firms use derivative instruments to hedge exposure to changes in the fair value of an asset or…

A: How are you mitigating the risk among the various labels?

Q: Why is premium on issue of debentures considered a capital profit?

A: Debenture: Debenture is a type of debt instrument and it is unsecured by collateral. Since,…

Q: The potential loss incurred from purchasing a call option is finite, but the potential loss to the…

A: Let's figure out the payoff to the seller  or writer of the call option at the time of expiration of…

Q: Current GAAP recommends that the fair value method be used to account for compensatory stock option…

A: The answer for the theory question on the Fair value method to account for the Compensatory stock…

Q: What accounting treatments are appropriate for investments in equity securities without readily…

A: Investment: It refers to the process of using the currently held excess cash to earn profitable…

Q: What is the fair value option? Where do companies that elect the fair value option report unrealized…

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Q: at is the partial equity metho

A: Partial equity method: The partial equity method may be a compromise between the initial value…

Q: Explain and discuss the preemptive right of common stockholders. Is this fair? Why or why not?

A: Common stockholders are actually the real owners of the corporation or company. Preemptive right is…

Q: Payoff from entering into a forward contract does the buyer have more to gain going long than the…

A: Forward contract is the contract which allows a buyer to buy a certain stock or other assets while a…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.