Question 1: Identify where the cash flow effect of each of the following transactions is reported in the statement of cash flows, operating, investing, or financing section. State the direction of each change. State non if there is no cash flow effect.
1. issuance of stock for cash
2. issuance of stock for lang
3. acquistion of treasury stock
4. reissuance of tresury stock
5. declaration of a cash divident
6. payment of a cash divident previously declared
7. declaration and issuance of a large stock dividend
8. Declaration and issuance of a small stock dividend
9. granting of stock options
10. exercise of stock options
11. exercise of stock options
12. granting of RSUs
13. Issuance of long term notes payable
14. Issuance of convertible bonds
15. Conversion of convertible bonds to common stock
16. Payment of interest on bonds
17. Retirement of bonds at book value
18. Retirement of bonds at a gain
19. Retirement of bonds at a loss
Question 2. Historically, technology firms have been the most aggressive users of stock based compensation in the form of stock options granted to almost all employees of the firms. What is the rationale for offering stock options as compensation? Why has this form of compensation been particularly popular with technology firms in the past?