Stock Compensation

Question 1

What does FASB 718-10-30 require enterprises to use when it comes to stock options and other equity plans for officers/employees?

Answer 1

Fair Value Method

Question 2

How is Intrinsic Value Method Calculated?

Answer 2

Excess of Market Price over Exercise Price

Question 3

What are non-compensatory stock purchase plans

Answer 3

Plans that allow the employee to purchase company stock but is not treated as compensation expense

Question 4

What are the requirements of Non-Compensatory stock purchase plans

Answer 4

Full time employees meeting limited employment may qualify

Plan enrollment of option/purchase must not exceed 31 days

Discount of the market price is reasonable

Question 5

When is compensation cost allocated?

Answer 5

Allocated to the periods which the employee performs the related services

Question 6

What are the Journal Entries to accrue compensation expense?

Answer 6

DR Compensation Expense
CR APIC-Stock Options

Same entry over a few periods

Question 7

What are the journal entries to exercise options?

Answer 7

DR Cash
DR APIC-Stock Options
CR Common Stock
CR Capital in Excess of Par - Common

Question 8

When is total compensation cost determined?

Answer 8

Determined at the Date of Grant

Question 9

In a Compensatory stock option plan the grant, vesting and exercise dates are all different. APIC-Stock Options should be reduced at what date?

Answer 9

Exercise Date

Question 10

What method uses the date of grant to measure stock costs issued to employees?

Answer 10

Intrinsic Value Method & Fair Market Value Method