Stock options

Question 1

Option compensation expense

Answer 1

is the fair value of the options expected to be exercised. Amortized straight line over the service period (time to vesting).

Question 2

Journal entry for stock option expense

Answer 2

Debit Compensation expense,

Credit PIC - Stock options

Question 3

Market price of the stock

Answer 3

does not affect the recognized compensation expense after the grant date.

Question 4

Journal entry for expired non-exercised stock options

Answer 4

Debit PIC - stock options

Credit PIC- expired stock options

Question 5

Compensation expense

Answer 5

is not reversed if the option is not exercised.

Question 6

New estimates on defaulted options

Answer 6

cause the amortized expense to change for the remaining of the service period. The difference is recognized in the year of the change and the remaining years are amortized based on the new estimate.

Question 7

Stock awards

Answer 7

Are computed in the same way as options.

Question 8

Stock appreciation rights

Answer 8

Can receive cash for the difference in stock price on the grant date and the exercise date. Expense is recognized each year in the full amount of the liability.