Intermediate Accounting Study Set 7

The first step in measuring compensation expense from granting employee stock options is to determine the fair value on the date of grant.

The fair value of stock options on the date of grant is usually readily determinable.

The value of stock options expected to be forfeited reduce compensation expense.

An employee will generally exercise stock options only when the current market price is above the exercise price of the option.

The fixed price paid by an employee to acquire a share of stock under an option plan is the ________.

Which of the following items is generally not specified by a compensation arrangement involving stock options?

Which of the following statements regarding stock options is true?

Compensation expense associated with stock options is ________.

Among Fortune 500 companies, which of the following compensation plans is most common?

List and explain the terms that are required to account for the issuance of stock options.

An employee who receives an equity-classified award of stock options has the right to receive shares of stock.

The initial journal entry to record an equity-classified award of stock options increases stockholders' equity on the balance sheet.

The initial journal entry to record an equity-classified award serves as a disclosure for a stock option plan.

A stock option plan is generally revalued whenever there is a change in the estimated percentage of options that will be forfeited.

The compensation associated with equity-classified awards of stock options is ________.

If an unexpected forfeiture of options occurs under a stock option plan, the change in compensation is treated as ________.

For an equity-classified award of stock options, what journal entry is made at the date of grant?

What is the effect of an equity-classified award of stock options on the grant date?

When compensation is recognized under an equity-classified award of stock options, the expiration of stock options is treated as ________.

On January 1, Year 1, Fields Corporation granted 500,000 stock options to certain executives. The options are exercisable no sooner than December 31, Year 3 and expire on January 1, Year 7. The vesting period is 3 years. Each option can be exercised to acquire one share of $10 par common stock for $15. An appropriate option-pricing model estimates the fair value of each option to be $12 on the date of grant. What amount should Fields recognize as compensation expense for Year 1?