Under ASC 718 (as amended by ASU 2016-09), an entity may elect to account for forfeitures as they occur. When options are forfeited before vesting, previously recognized compensation expense for those options is reversed in the period of forfeiture. Answer B is correct. Answer A describes the alternative of estimating forfeitures (also permitted but not the only approach). Answer C increases rather than decreases expense upon forfeiture. Answer D bypasses the income statement, which is incorrect - the reversal runs through compensation expense.

Under ASC 718, awards that require or may require settlement in cash are classified as liabilities. Cash-settled SARs are liability awards and must be remeasured at fair value at each reporting date until settlement. Changes in fair value are recognized as compensation expense in the period of change. Answer C is correct. Answers A and B classify them as equity awards. Answer D correctly identifies them as liability awards but uses intrinsic value only at settlement, not fair value remeasured each period.

When stock options are exercised, the company receives the exercise price (debit Cash), removes the balance in APIC-Stock Options (debit APIC-Stock Options), and credits Common Stock at par and APIC for the total consideration. No additional compensation expense is recognized at exercise - all expense was recognized over the vesting period. Answer B is correct. Answer A records compensation at exercise date, which violates ASC 718's grant-date measurement principle. Answer C records a gain, but option exercises are equity transactions with no income statement effect on the issuer. Answer D credits Retained Earnings, which is incorrect.

Under ASC 718, a modification is accounted for by comparing the fair value of the modified award to the fair value of the original award immediately before modification. Any excess (incremental fair value) is recognized as additional compensation cost over the remaining requisite service period. Previously recognized compensation is not reversed. Answer A is correct. Answer B reverses prior expense and starts over, which overstates cost. Answer C ignores the incremental fair value from the repricing. Answer D records a company loss, treating an equity transaction as an income statement item.

Under ASC 718, compensation cost for performance-based awards is recognized over the requisite service period based on the probable outcome of the performance condition. If achievement is probable, expense accrues over the service period. If the probability assessment changes, the cumulative expense is adjusted in the period of change. Answer D is correct. Answer A defers all recognition until the target is confirmed, ignoring accrual accounting. Answer B recognizes immediately at grant regardless of service. Answer C is an all-or-nothing approach that does not reflect the probability-based model required by ASC 718.

ASC 718 provides a practical expedient for nonpublic entities that cannot estimate expected volatility. Such companies may use a 'calculated value' method that substitutes the volatility of an appropriate industry sector index for the entity's own expected volatility. Answer D is correct. Book value per share (A) is an accounting measure, not a fair value substitute. Comparable public company market values (B) are used in valuation contexts but are not the specific ASC 718 practical expedient. Historical cost (C) has no role in fair value measurement.

Under ASC 718, when it is determined that a service condition will not be met, all previously recognized compensation expense for that award is reversed in the period of that determination. The cumulative compensation cost is reduced to zero because no benefit is ultimately received - the employee will not vest. Answer D is correct. Answer A recognizes three-quarters of the cost as if partial vesting occurs, but cliff-vesting awards confer no partial benefit if the employee leaves before the vesting date. Answer B correctly arrives at zero cumulative expense but implies expense was never appropriately recognized in prior periods, which is incorrect - prior recognition was appropriate and is reversed in the current period. Answer C ignores the required reassessment and continues expense accrual despite the changed probability determination.

When vested options expire unexercised, compensation expense is not reversed - the employee rendered the service and the compensation has been appropriately recognized. The APIC-Stock Options balance associated with the expired options remains in stockholders' equity; it is typically reclassified from APIC-Stock Options to APIC-Other or left as is. No income statement impact occurs. Answer D is correct. Answer A reverses expense after vesting, which is not permitted. Answer B records a gain, treating an equity transaction as income. Answer C reduces APIC without increasing Retained Earnings - the entire APIC balance is retained in equity.

Year 1 expense (all 6,000 options): 6,000 x $15 / 3 = $30,000. At end of Year 2, 500 options forfeited: reverse Year 1 expense for those options: 500 x $15 / 3 = $2,500. Year 2 expense for remaining 5,500 options: 5,500 x $15 / 3 = $27,500. Net Year 2 expense = $27,500 - $2,500 = $25,000. Cumulative through Year 2 = $30,000 + $25,000 = $55,000. Alternatively: 5,500 options x $15 x (2/3) = $55,000. Answer C is correct. Answer A ignores forfeitures entirely. Answer B subtracts only one year of forfeited expense. Answer D recognizes only Year 2 expense.

Total compensation = 9,000 x $12 = $108,000. Under straight-line attribution over 3 years: $108,000 / 3 = $36,000 per year. Year 2 expense = $36,000. Answer D is correct. Answer A is the total grant-date fair value recognized immediately. Answer B applies $12 to one-third of the options for half a year. Answer C would result from applying a non-standard attribution period.