1A. On May 1, 2020, Wong Ltd. issued $ 500,000, 10 year, 7% bonds at 103. Twenty detachable warrants were attached to each $ 1,000 bond, which entitled the holder to purchase one of Wongs no par value common shares for $ 40. At this time, similar bonds without warrants were selling at 96. It was determined that the fair value of Wongs common shares was $ 35, but the value of the warrants was NOT determinable. Wong is a private corporation that follows ASPE, but does NOT use the residual method.

On May 1, 2020, Wong should credit Contributed SurplusStock Warrants for

		$ 35,000.
		$ 20,000.
		$ 15,000.
		$ 0.

1B. Information concerning the capital structure of Shelmardine Corporation follows

December 31,

2020 2019

Common shares outstanding 100,000 shares 100,000 shares

Convertible preferred shares outstanding 10,000 shares 10,000 shares

9% convertible bonds $ 2,000,000 $ 2,000,000

During 2020, Shelmardine paid dividends of $ 1.00 per common share and $ 2.50 per preferred share. The preferred shares are non-cumulative, and convertible into 20,000 common shares. The 9% convertible bonds are convertible into 50,000 common shares. Net income for calendar 2020 was $ 500,000. Assume the income tax rate is 30%.

What is the diluted earnings per share for 2020?

		$ 4.00
		$ 3.68
		$ 3.54
		$ 2.94

1C. Which statement is correct about the accounting for employee stock options?

		The expense is recorded over the period of vesting.
		The expense is recorded over the period to expiry.
		The expense is recorded immediately upon grant date.
		No expense is recorded for accounting purposes.

1D. Which statement best explains the accounting for compound instruments?

		Once separated, each component is accounted for at fair value with changes recorded through income.
		Once separated, each component is accounted for in accordance with its substance.
		Once separated, each component is accounted for at amortized cost.
		Once separated, each component is accounted for at historical cost.

1E. What is an option?

		A contract that gives the holder the right to sell an instrument at a pre-specified price.
		A contract that is derived from some other underlying quantity, index, asset or event.
		A contract that gives the holder the right to acquire an instrument at a pre-specified price.
		A contract that gives the holder the right to buy or sell something at a specified price.