Under the fair value method, if an executive does not exercise a stock option and it is allowed to lapse, Common Stock Option Warrants is debited.What is credited?
A)Additional Paid-In Capital from Expired Stock Options
B)Compensation Expense
C)Gain from Expired Stock Options
D)Deferred Compensation

Question

Quizplus · Accepted Answer

Under the fair value method, if an executive does not exercise a stock option and it is allowed to lapse, Common Stock Option Warrants is debited and Additional Paid-In Capital from Expired Stock Options is credited. This is because the fair value at the grant date was recognized as a component of equity and is recorded in Additional Paid-In Capital. When the option expires, the fair value is removed from equity and transferred to Common Stock Option Warrants.

Under the Fair Value Method, If an Executive Does Not