Question #13
Reading: Reading 9 Employee Compensation - Post-Employment and Share-Based
PDF File: Reading 9 Employee Compensation - Post-Employment and Share-Based.pdf
Page: 5
Status: Incorrect
Correct Answer: A
Your Answer: A
Question
Which type of compensation is most likely to increase current liability for a company?
Answer Choices:
A. Stock-option grants
B. Stock grants
C. Salary and wages. Prisma Inc. started an employee stock option and RSU grant plan. On Jan 1, 20X1, the company made a grant of 150,000 at-the-money options (maturing in five years) and 25,000 shares. The fair value of the options was $1.79 and the stock price on the date of the grant was $16. Both awards vest after 3 years. The average stock price during the year was $17 and it was $17.50 at the end of the year
Explanation
Unpaid earned salary and wages would be shown as a current liability. Options and stock
grants do not result in a liability.
(Module 9.1, LOS 9.a)
Prisma Inc. started an employee stock option and RSU grant plan. On Jan 1, 20X1, the
company made a grant of 150,000 at-the-money options (maturing in five years) and 25,000
shares. The fair value of the options was $1.79 and the stock price on the date of the grant
was $16. Both awards vest after 3 years. The average stock price during the year was $17
and it was $17.50 at the end of the year.