When Accounting for a Fixed Compensatory Share Option Plan, a Company

question 3

Multiple Choice

When accounting for a fixed compensatory share option plan, a company must record which of the following on the date of grant?

• A) a journal entry recognizing the common stock issued
• B) a journal entry recognizing the compensation expense
• C) a memorandum entry explaining the terms of the compensatory share option plan
• D) a memorandum entry of the expected annual compensation expense amount

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Definitions:

Intra-Entity Debt Transactions

Financial obligations or loans between entities within the same corporate group, not necessarily evidenced in consolidated financial statements until settled externally.

Amortization Process

The systematic reduction of a loan or the spreading out of capital expenses over a fixed period of time.

Investment Account

An account holding securities, cash, and other assets managed by an investment dealer or manager for the benefit of the investor.

Variable Interests

Interests in an entity that change based on changes in the entity's net asset value, income, or cash flows.