When using the preferred approach to account for a compensatory stock option plan, the total compensation cost is the
A)fair value per option times the number of options issued
B)fair value per option times the number of options that actually become vested
C)fair value per option times an estimate, at the grant date, of the number of options expected to be deferred
D)fair value per option times the number of options expired

Question

Quizplus · Accepted Answer

The preferred approach for accounting for a compensatory stock option plan involves recognizing the total compensation cost based on the fair value per option times the number of options that actually become vested. This approach aligns the expense recognition with the actual benefit the company receives from the employee's service, which is when the options vest.

When Using the Preferred Approach to Account for a Compensatory