The Incremental Method to Accounting for Convertible Bonds Means That

Multiple Choice

The incremental method to accounting for convertible bonds means that:

A) The proceeds of the bond are allocated on the basis of the book values of the straight bond and imbedded stock option
B) The proceeds of the bond are allocated on the basis of the relative market values of the straight bond and imbedded stock option
C) The stock option is valued at the difference between the total proceeds of the bond issue and the market value of an equivalent straight bond issue
D) None of these answers are correct