Which of the following statements about stock options is not correct?
A)Stock options are intended to give upper management the same goals as stockholders.
B)When stock options are exercised by upper management,existing stockholders lose voting power.
C)Stock options may create an incentive for upper management to overstate net income.
D)An expense is reported by the company when stock options are exercised.

Question

Quizplus · Accepted Answer

To encourage employees to work hard for a corporation,employee pay packages often include a combination of base pay,cash bonuses,and stock options.Stock options give employees the option of acquiring the company's stock at a predetermined price,often equal to the then-current market price.Accounting rules require that,at the time the company grants stock options (rather than when the stock options are exercised),an expense must be reported for the estimated cost associated with stock options,even if the option price equals the current stock price.

Which of the Following Statements About Stock Options Is Not