Which of the Following Was True About Employee Stock Options

question 8

Multiple Choice

Which of the following was true about employee stock options prior to 1995?

• A) The options never had any affect on a company's financial statements
• B) The value of options which were at-the-money when issued had to be expensed on the income statement
• C) The value of options which were at-the-money when issued had to be reported in the notes to the financial statements
• D) Options which were at-the-money when issued did not affect a company's financial statements

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Definitions:

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including expenses like rent, salaries, and insurance.

Variable Inventory Costs

Variable inventory costs fluctuate with changes in production volume, including costs like raw materials and direct labor.

Special Order

A special order refers to a one-time or unusual request from a customer to purchase goods or services that differ from a company's regular offerings, often requiring unique pricing and production scheduling.

Sales Price

The amount for which a product or service is sold to the customer.