CFA Practice Question

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CFA Practice Question

According to GAAP, a separate value must be assigned to the equity feature included with the following debt securities:

I. convertible bonds
II. bonds issued with warrants
A. Neither of these bonds
B. I and II
C. II only
Explanation: When convertible bonds are sold, all of the proceeds are assigned to the liability. When bonds with warrants are sold, a portion of the proceeds is assigned to equity.

User Contributed Comments 2

User Comment
CoffeeGirl convertible bond. all proceed is treat as liability.
bond with warrant, a portion is assigned to equity.
nmech1984 learnt and forgot
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