According to APB Opinion No.14, when convertible preferred stock is issued, the conversion provision is
A)given no consideration
B)assigned a value based on the difference between the par value and the fair market value of the stock on the date of issuance
C)assigned a value based on the difference between the stated value of the stock and the market value on the date of issuance
D)assigned a value based on the difference between the fair market value of the stock without the conversion provision and the fair market value of the stock with the conversion provision

Question

Quizplus · Accepted Answer

APB Opinion No. 14 specifies that when convertible preferred stock is issued, the conversion feature is given no consideration in the accounting process. This means that the financial reporting does not assign a separate value to the conversion provision.