How will stockholders' equity and net income be affected by the issuance of stock purchase rights to employees under a noncompensatory share purchase plan?
A) I
B) II
C) III
D) IV

Question

How will stockholders' equity and net income be affected by the issuance of stock purchase rights to employees under a noncompensatory share purchase plan? 
A) I 
B) II 
C) III 
D) IV

Quizplus · Accepted Answer

The issuance of stock purchase rights to employees under a noncompensatory share purchase plan does not directly impact net income, as it is not considered a cost or expense. However, it can impact stockholders' equity as the company may have to issue new shares to fulfill the purchase rights, which increases the number of outstanding shares and dilutes the ownership percentage of existing shareholders.

How Will Stockholders' Equity and Net Income Be Affected by the Issuance