Compensatory stock option plans are a common component of employee compensation packages, allowing employees to purchase company stock at a predetermined price.The financial accounting for such plans involves various considerations. Let's examine a set of statements related to compensatory stock option plans and identify whichstatement does not accurately reflect the financial accounting principles associated with these plans.Question:Which of the following statements regarding the financial accounting for compensatory stock option plans is not accurate?Multiple ChoiceA) Stock options' fair value is recognized as compensation expense over the vesting period.B) The common stock issued upon the exercise of stock options is recorded at its fair market value.C) Changes in the market value of stock options during the vesting period do not impact the recorded compensation expense.D) The par value of common stock issued upon the conversion of options increases total owners' equity.

Compensatory stock option plan is a kind of stock compensation plan. The stock compensation plan…

Answered: Compensatory stock option plans are a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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If a preferred stock is of the cumulative type, a. dividends cannot be passed if they are earned. b. unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common stockholders. c. dividends must be paid, and if not a liability is created. d.dividends must be paid on an equal basis with common stock, so long as earnings permit.
Why are unrealized gains and losses from available-for-sale securities not reported as a component of net income? Select one: a. Because goodwill exists that must be separately accounted for b. Because the investor has the ability to exercise significant influence over the investee c. Because consolidated financial statements must be prepared d. Because large swings in market value over which management has no control may distort current period performance as measured by net income
If the potential dilutor is restricted stock, the treasury stock buyback method is used and the assumed cash proceeds are equal to unrecognized compensation expense at that point in time. True False
Stock dividends and stock splits are similar in that both do not change total stockholders’ equity. (True/False) A company must accrue a liability for sick pay that accumulates but does not vest. (True/False) A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to complete a refinancing. (True/False) Federal income taxes should be included in an employer’s payroll tax expense. (True/False) Whether an employee earns $80,000 a year or $800,000 a year, all of the earnings will be subject to Medicare deductions. (True/False) To record compensated absences as a liability GAAP establishes four criteria. The employer needs to meet any two of these four criteria in order to recognize a liability for compensated absences. (True/False) Stock dividends and stock splits both cause the number of shares outstanding to increase and retained earnings to decrease. (True/False)

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