Debt issued with warrants is considered a hybrid security that possesses both debt and equity characteristics. Will accountants always separate the total proceeds into debt and equity on the balance sheet? Explain. (Select all that apply)

A. There are two methods of allocating the debt proceeds when issued with detachable warrants: 1. The Proportional Method: Under the proportional method, the allocation is based on relative fair market values of the debt and equity securities. 2. The Incremental or Residual Method: Under the incremental method, part of the proceeds are allocated to the fair market value of one security and the balance of the proceeds are allocated to the other security). The security receiving the residual allocation has the least reliable measure of fair value.

B. If the warrants are non-detachable, there is an allocation of the total proceeds received on the financing between the debt and equity components.

C. If the warrants are non-detachable, then the total debt proceeds received are fully assigned to the debt issue and there is no allocation between debt and equity, unless there is a beneficial conversion option.

D. If the warrants are detachable, then the total debt proceeds received are fully assigned to the equity issue and there is no allocation between debt and equity, unless there is a beneficial conversion option.

E. Accountants will use The Incremental or Residual Method if an allocation is appropriate.

F. Accountants will use The Proportional Method if an allocation is appropriate.