Schmidt Electronics Offered an Incentive Stock Plan to Its Employees

question 44

Multiple Choice

Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 120,000 options were granted for 120,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $3 based upon an option pricing model. What is the entry to record the expiration of 15% of the options on December 31, Year 5?

• A) \[\begin{array} { | c | r | r | }
• \hline \text { APIC-Stock Options } & 54,000 & \\
• \hline \text { APIC-Expired Stock Options } & & 54,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | r | r | }
• \hline \text { APIC-Stock Options } & 54,000 & \\
• \hline \text { Retained Earnings } & & 54,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { APIC-Stock Options } & 54,000 & \\
• \hline \text { Compensation Expense } & & 54,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Stock Options Receivable } & 90,000 & \\
• \hline \text { Common Stock } & & 30,000 \\
• \hline \text { APIC } & & 60,000 \\
• \hline
• \end{array}\]

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Definitions:

Relative Deprivation Theory

A theory that individuals or groups assess their well-being based on comparisons with others, feeling deprived if they perceive themselves worse off.

Bureaucratization

The increase and imposition of complex administrative rules, procedures, and structures within an organization or society.

Structural Conduciveness

The extent to which social structures allow for, or facilitate, certain behaviors or developments.

Social Control

Mechanisms, strategies, and institutions society employs to regulate individual behavior, maintaining order and conformity.