The Exercise Price and Market Price of Stock Under a Fixed

question 3

Multiple Choice

The exercise price and market price of stock under a fixed compensatory stock option plan are equal on the grant date.The fair value of the options is greater than the option price.Under the fair value method,

• A) compensation expense will be recognized in connection with the option plan.
• B) no compensation expense will be recognized in connection with the option plan.
• C) deferred compensation will be recognized.
• D) no paid-in capital from stock options will be recognized.

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Definitions:

Merchandise Inventory

Goods that a company holds for the purpose of sale to customers in the ordinary course of business.

Merchandise Inventory

Goods or products that a company holds for the main purpose of selling them to customers.

Balance Sheet

The balance sheet is a financial statement that provides a snapshot of a company's financial position, listing assets, liabilities, and shareholders' equity at a specific point in time.

Purchases Returns and Allowances

Transactions where buyers return goods to the seller or receive a reduction in the selling price, decreasing the cost of purchases.