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Chanllenging Frequent Asked CPA Question on accounting for employee Stock Options

Peter Tran's Profile

Hi all… Why the correct answer under $14k? Can please explain? Thanks.

2,000 share options granted to each of 3 directors on 1 January 2010 subject to them being still employed as at
31 December 2012, the date of vesting.
The fair value of each option on 1 January 2010 was $10.
Options will vest when the share prices reach $14.

The share price as at 31 December 2010 was $8 and is not anticipated to rise in the next two years and only 2
directors will still be with the company as at 31 December 2012. What is the appropriate treatment for share
options in the financial statement for the year ended 31 December 2010?
A. Cost and equity balance in financial statement at 31 December 2012 is $20,000
B. Cost and equity balance in financial statement at 31 December 2012 is $30,000
C. Cost and equity balance in financial statement at 31 December 2012 is $13,333
D. Cost and equity balance in financial statement at 31 December 2012 is $18,667

Answers

Peter Tran
Title: accountant
Company: AC Accounting
(accountant, AC Accounting) |

This question has assumption the options are exercised it seems.

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