1. Convertible preferred stock contains the option for the investor to convert preferred shares into a fixed amount of common shares. Explain the different accounting treatment at date of issue and conversion. How does this differ from accounting for convertible debt issues?

2. Explain the difference in accounting: treatment for securities issued with detachable stock warrants and those with non-detachable stock warrants?

3. A warrant is a stock option, which provides motivation to key employees in the form of additional compensation. Explain how a stock option works, and the proper (FASB) accounting treatment of recognizing compensation expense. How is compensation expense determined?