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Topic: QUESTION OF THE DAY - MCQ’S ALL SECTIONS (

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AndrewCPA
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Posted: 20 Jan 2011 at 18:25 \| IP Logged

Today’s question: REG

On February 12, Harris sent Fresno a written offer to purchase Fresno's land. The offer included the following provision: "Acceptance of this offer must be by registered or certified mail, received by Harris no later than February 18 by 5:00 p.m. CST." On February 18, Fresno sent Harris a letter accepting the offer by private overnight delivery service. Harris received the letter on February 19. Which of the following statements is correct?

A) A contract was formed on February 19.

B) Fresno's letter constituted a counteroffer.

C) Fresno's use of the overnight delivery service was an effective form of acceptance.

D) A contract was formed on February 18 regardless of when Harris actually received Fresno's letter.

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AndrewCPA
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Posted: 21 Jan 2011 at 14:25 \| IP Logged

Correct Answer: B

Explanation: Acceptances must be unconditional, complying with all of the offeror's terms. This was a counteroffer because it was not sent by registered or certified mail and it was not received by February 18. The remaining answer choices are incorrect because no contract was formed and overnight delivery service was not registered or certified as required.

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AndrewCPA
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Posted: 21 Jan 2011 at 18:17 \| IP Logged

Today’s question: FAR

On January 2, 2006, Morey Corp. granted Dean, its president, 20,000 stock appreciation rights. On exercise, Dean is entitled to receive cash for the excess of the stock's market price on the exercise date over the market price on the grant date. The rights are exercisable beginning on January 2, 2008 and expiring on December 31, 2008. The market price of Morey's stock was $30 on January 2, 2006 and $45 on December 31, 2006. Morey used the Black-Scholes-Merton pricing model and estimated the values of each right at $16 each. As a result of the stock appreciation rights, the company should recognize compensation expense for 2006 of:

A) $300,000

B) $320,000

C) $150,000

D) $160,000

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AndrewCPA
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Posted: 24 Jan 2011 at 16:15 \| IP Logged

Correct Answer: D

Explanation: The service period is the period from the grant date, January 2, 2006, to the exercise date, January 2, 2008, or two years. Therefore, the total compensation of $320,000 (20,000 SARS X the estimated fair value of $16 each) divided by two years equals the compensation expense of $160,000 each year.

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AndrewCPA
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Posted: 24 Jan 2011 at 19:09 \| IP Logged

Today’s question: BEC

A firm's target or optimal capital structure is consistent with which one of the following?

A) Maximum earnings per share.

B) Minimum cost of debt.

C) Minimum risk.

D) Minimum weighted average cost of capital.

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