Question

In: Accounting

a. _____ T or F Stock options are recorded as paid-in-capital over the period during which...

a. _____ T or F Stock options are recorded as paid-in-capital over the period during which the employee provides associated service to vest in the options. (if false, identify and correct the errors)

b. _____ T or F Stock appreciation rights give the employee compensation at a future date, based on the market price at the date of exercise in excess of a pre-established price. (if false, identify and correct the errors) ?

Solutions

Expert Solution

1) Stock options are recorded as paid-in-capital over the period during which the employee provides associated service to vest in the options...TRUE

Explanation: The journal entry includes a debits to “compensation expense” (this expense is reported in the income statement) and a credits “additional paid in capital stock - stock options”. The “compensation expense” will be reported in the income statement and “additional paid in capital - stock options” will be reported under stockholder’s equity account reported in the balance sheet

2) Stock appreciation rights give the employee compensation at a future date, based on the market price at the date of exercise in excess of a pre-established price....TRUE

Explanation: Stock appreciation rights provides the employee compensation at a future date on basis of the market price at the date of exercise in excess of a pre-established price, due to which it may have a significant impact on reported earnings.


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