Which of the following statements is true of stock option plans?
A) Compensation expense is recorded only if the option price is less than the stock's fair value on the grant date.
B) Compensation is measured on the date the stock is issued.
C) The issued stock is recorded at the market price, not the option price.
D) They all serve to compensate employees.

Question

Quizplus · Accepted Answer

Compensation expense for stock option plans is recorded only if the option price is less than the stock's fair value on the grant date. If the fair value of the stock is higher than the option price, there is no compensation expense. The fair value is typically determined using an option pricing model.

Which of the Following Statements Is True of Stock Option