Which one of the following statements is not true with regard to employee compensatory stock option plans?
A)When a stock option is exercised under a compensatory stock option plan, the newly issued common stock is recorded at the exercise price and the value of the options at the grant date.
B)When stock warrants are issued under a noncompensatory stock option plan, no formal journal entry is required to record the stock warrants.
C)When a stock option is exercised under a compensatory stock option plan, the newly issued common stock is recorded at the exercise price and the previously recorded value of the warrants.
D)For federal income tax purposes, any gains resulting from stock options earned by employees are taxed at ordinary income tax rates.

Question

Quizplus · Accepted Answer

Option A is not true because when a stock option is exercised under a compensatory stock option plan, the newly issued common stock is typically recorded at the exercise price, but the value of the options at the grant date is not part of this journal entry. Instead, the value of the options granted is recognized as an expense over the vesting period.

Which One of the Following Statements Is Not True with Regard