Accounting for Stock Options in a Company

What is the primary condition for a stock option to gain value?

• The stock option is exercised immediately.

• The stock price decreases.

• The stock price increases.

• The stock option is issued at a higher value.

Which method is commonly used to determine the value of stock options?

• Discounted Cash Flow

• Black-Scholes Model

• Net Present Value

• Cost-Benefit Analysis

What is the vesting period in the context of stock options?

• The time when stock options are first issued.

• The period before the employee can own the stock options.

• The time when stock options are exercised.

• The period when stock options are valued.

How is the compensation expense recorded on the income statement when stock options vest?

• As a compensation expense

• As an asset

• As a revenue

• As a liability

What happens to retained earnings when stock options vest?

• They increase.

• They remain unchanged.

• They decrease.

• They are transferred to liabilities.

When a stock option is exercised, what is debited to reflect the cash received?

• Common Stock

• Cash

• Additional Paid-in Capital

• Retained Earnings

What is credited to balance the accounts when a stock option is exercised?

• Cash

• Common Stock and Additional Paid-in Capital

• Retained Earnings

• Liabilities