ANSWER TRUE OR FALSE AND

EXPLAIN FULLY

1.

Similar to an investment in another firms shares, the acquisition of a companys

own shares creates an asset.

2. The SEC permits gains and losses on treasury stock transactions to be

reported on the income statement.

3.

Options and warrants are critical to the earnings per share computation

because they are always considered dilutive.

4.

Share-based compensation plans are focused on stock option awards so as to

minimize the possibility that the employees receiving the grants will feel they are

receiving potentially no value.

5.

The realized gain or loss for the difference between the carrying value and the

cash received from selling an AFS security is excluded from net income since it

flows through OCI.

6.

The accounting for the conversion to common stock of convertible preferred

stock may involve recognition of a gain or loss if the par value of the preferred

stock is different from the par value of the common stock