FAR 5 - Financial Instruments and Derivatives

Question 1

Oil Futures example-

Answer 1

DR $70,000,000 CR Cash $70,000,000/ DR Loss on Market Decline in Inventory $.04 CR Inventory $.04/ DR Receivable on Derivative $.04 CR Gain on FV Hedge $.04

Question 2

Stock Options go to who?

Answer 2

Employees

Question 3

Stock Rights go to who?

Answer 3

Shareholders

Question 4

Stock Warrants go where?

Answer 4

Bonds or preferred stock, anything where they can be made detachable

Question 5

Formula - Intrinsic value of a stock option

Answer 5

Market Price-Strike Price