The Expense Incurred by Issuing Stock Options Should Be

question 31

Multiple Choice

The expense incurred by issuing stock options should be:

• A) classified as a financing activity.
• B) added back to net income in the operating activities section.
• C) subtracted from net income in the operating activities section.
• D) does not appear in the statement of cash flows.

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Definitions:

Overhead Costs

Indirect costs of products or services.

Capacity-Sustaining Cost

Costs incurred to maintain the production capacity of a company at current levels, including costs for maintenance and repair of equipment.

Batch-Level Cost

Costs that are incurred as a result of producing a batch of products, rather than the production process as a whole.

Unit-Level Cost

A cost that is directly incurred for each unit of production or service provided.