The exercise price and market price of stock under a fixed compensatory stock option plan are equal on the grant date. The fair value of the options is greater than the option price . Under the fair value method Compensation expense will be recognized in connection with the option plan No compensation expense will be recognized in connection with the option plan Deferred compensation will be recognized No paid-in capital from stock options will be recognized

The exercise price and market price of stock under a fixed compensatory stock option plan are equal on the grant date. The fair value of the options is greater than the option price . Under the fair value method Compensation expense will be recognized in connection with the option plan No compensation expense will be recognized in connection with the option plan Deferred compensation will be recognized No paid-in capital from stock options will be recognized

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter15: Shareholders’ Equity: Capital Contributions And Distributions

Section: Chapter Questions

Problem 6Q

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Which of the following is true about stock- based compensation? (check all that apply) Stock-based compensation expense is always reported as part of Selling, General, and Administrative (SG&A) expense The fair value of an option grant is always greater than the strike price of the option grant Stock-based compensation expense is adjusted based on movements in stock price after the exercise date Stock-based compensation expense must be added back in the Operating section of SCF under the indirect method
Current GAAP recommends that the fair value method be used to account for compensatory stock option plans. From a conceptual point of view, this method is an improvement over the intrinsic value method. Required: Explain how the fair value method is an improvement over the intrinsic value method.
[The following information applies to the questions displayed below.] Similarly, we estimate the fair value of stock options at the grant date and expense it over the service period, usually from the date of grant to the vesting date. Fair value is estimated at the grant date using an option-pricing model that considers the exercise price and expected term of the option, the current market price of the underlying stock and its expected volatility, expected dividends, and the expected risk-free rate of return. Knowledge Check 01 On January 1, Year 1, Abbott Company granted 92,000 stock options to certain executives. The options are exercisable no sooner than December 31, Year 3, and expire on January 1, Year 7. Each option can be exercised to acquire one share of $1 par common stock for $14. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. What is the amount of compensation expense for Year 1? Note: Round your answer to the nearest…
According to IFRS, once the total compensation is measured at the date of grant A. It can be changed in future periods related to a change in market conditions B. It can be changed to reflect the rise or fall in the market price of the company's ordinary shares C. A company is permitted to adjust tge number of share options expected to the actual number of instruments vested D. All of the choices are correct
Under IFRS 2, Share-Based Payment, the value of the options that lapse after vesting shall be credited to income during the period that the options lapse remain in equity. be converted into a liability. be credited to expense during the period the options lapse.
Discuss the relevance of cum-div closing date on the valuation of an option on an underlying asset is expected to pay a dividend.
Compensation expense must be adjusted during the service period to reflect changes in the fair value of options caused by changes in the market price of the underlying shares. O True O False
2. Which of the following terms best describes a financial instrument which gives the holder the right, but not the obligation, to purchase shares at a specified price, up to and including a specified date? European Option Call Option Put Option In-the-money Option
2. Under IFRS 2, Share-Based Payment, the value of the options that lapse after vesting shall A. be credited to expense during the period the options lapse. B. be credited to income during the period that the options lapse C. remain in equity. D. be converted into a liability.
On what basis are NQ stock options usually taxed when the option has no readily ascertainable fair market value? a. the difference between the fair market value of the shares when purchased and the option price b. the fair market value of the shares c. the option price plus 1⁄2 the fair market value of the stock when sold d. the price when the shares are sold minus the original option value
Select all that are true with respect to option valuation: Group of answer choices The holder of a call option has rights to the dividend on the underlying stock. The holder of a put option has rights to the dividend on the underlying stock. A call option on a dividend paying stock would be worth less than a call option on that same stock if it were non-dividend paying (i.e., all else is equal other than the dividend). A call option on a dividend paying stock would be worth more than a call option on that same stock if it were non-dividend paying (i.e., all else is equal other than the dividend).
1. When share options granted vest base on a service condition a. Total fair value of the share options granted > Total compensation expense recognized over the vesting period b. Share options outstanding balance at the end of first year is not equal to Compensation Expense for first year c. Total fair value of the share options granted = Total compensation expense recognized over the vesting period d. Share options outstanding balance at the end of second year is equal to Compensation Expense for second year 2. When share appreciation rights are granted to employees a. expense, liability and equity accounts are recognize b. expense and equity accounts are recognize c. expense and liability accounts are recognize d. liability and equity account are recognized 3. Provided the specified vesting conditions, if any, are met, share-base payment arrangement is an arrangement between an entity and another party that entitles the other party to receive a. Cash or…