CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Which statement(s) is (are) true when options are exercised and the market price is higher than the exercise price?

I. Compensation expense should be debited.
II. Compensation expense should be credited.
III. The exercise results a tax liability for the employee.
IV. The exercise results a tax benefit for the company.
Correct Answer: III and IV

User Contributed Comments 2

User Comment
quanttrader compensation expense should be debited once the option is granted
davidt876 and it's a tax liability for the employee because the difference in exercise price and market value is treated as compensation and is therefore taxable
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