Question #16

Reading: Reading 9 Employee Compensation - Post-Employment and Share-Based

PDF File: Reading 9 Employee Compensation - Post-Employment and Share-Based.pdf

Page: 6

Status: Correct

Correct Answer: A

Part of Context Group: Q16-18 First in Group
Shared Context
- The cash outflow reported on account of share-based compensation is: A) $133,333. B) $0. C) $222,833.
Question
The change in stock-holder's equity at the end of 20X1 on account of the share-based compensation is closest to:
Answer Choices:
A. $133,333
B. $0
C. $222,833
Explanation
The compensation expense reduces net income and hence retained earnings. An identical amount is taken to compensation reserve account in equity and hence there is zero net change in equity.
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