F7 - M7 - Stock Compensation

Question 1

A ________ is the right to purchase shares of a corporation’s capital stock under fixed conditions of time, place, and amount.

Answer 1

stock option

Question 2

Under traditional stock option and stock purchase plans, an employer corporation grants options to purchase shares of its stock, often at a price ____________________, making it possible for the individual exercising the option to have a potential profit at the moment of acquisition.

Answer 2

lower than the prevailing market

Question 3

The cost of compensation is measured by the ______ based on an option pricing model.

Answer 3

fair value

Question 4

Stock options or purchase plans can be either (2)

Answer 4

noncompensatory or compensatory.

Question 5

Under U.S. GAAP, an employee stock purchase plan is noncompensatory if it meets all of the following requirements:

Answer 5

1) Substantially all full-time employees meeting limited employee qualifications may participate, 2) Stock is offered to eligible employees equally, but the plan may limit the total amount of shares that can be purchased. 3) The time permitted to exercise the rights is limited to a reasonable period.
4) Any discount from the market price is no greater than would be a reasonable offer of stock to
shareholders or others.

Question 6

Stock option plans that meet the requirements of a non-compensatory plans. do not require the recognition of___________ by the sponsoring company

Answer 6

compensation expense

Question 7

Plans that meet the characteristics are classified as

Answer 7

compensatory plans

Question 8

Compensatory stock options and stock purchase plans are valued at the _______ of the options issued.

Answer 8

fair value

Question 9

Under the fair value method, total compensation expense is measured by applying an ________________, such as the Black-Scholes option pricing model.

Answer 9

acceptable fair-value pricing model

Question 10

This compensation expense, calculated on the _______date of the options, is allocated ____________ in accordance with the matching principle.

Answer 10

grant date; over the service period

Question 11

The service period is the vesting period for compensatory stock options , which is the time between _____ date and the ______date.

Answer 11

grant date and the vesting date.

Question 12

A ________entitles an employee to receive an amount equal to the excess of the market price of stock at the exercise date over a predetermined amount (usually market price at grant date).

Answer 12

A stock appreciation right

Question 13

A stock appreciation right entitles an employee to receive an amount equal to the ______________at the ________ date over a predetermined amount (usually market price at grant date).

Answer 13

excess of the market price of stock; exercise

Question 14

A stock appreciation right - This excess over market price of stock is multiplied by the number of rights outstanding is recorded as ______ and a __________.

Answer 14

rights outstanding ; compensation expense and a liability

Question 15

Compensation expense for _____________ must be adjusted annually to account for changes in the market price of the stock.

Answer 15

stock appreciation rights outstanding

Question 16

Unlike stock options, ________ do not require the employee to make a cash payment.

Answer 16

stock appreciation rights