When share options are exercised by an employee under a compensatory share option plan, the issuance of the common stock is recorded at the
A) amount of cash received.
B) amount of cash received less the previously recorded value of the options received.
C) amount of cash received plus the previously recorded value of the options received.
D) market price minus the share option price.

Question

Quizplus · Accepted Answer

When share options are exercised under a compensatory share option plan, the issuance of common stock is recorded at the amount of cash received plus the previously recorded value of the options received. This approach recognizes both the cash paid by the employee to exercise the options and the value of the compensation expense previously recognized for the options granted.

When Share Options Are Exercised by an Employee Under a Compensatory