Questions
Questions

SP25-BL-BUS-A327-1377

Single choice

On March 1 four years ago, Bema Incorporated issued 600 shares of its publicly traded stock as compensation to its employee, Destiny. On date of issuance, the stock’s fair market value was $12,000. Under the terms of an employment contract, Destiny could not dispose of the stock before July 1 of the current year, and if employment was terminated before that date, the stock would be forfeited back to Bema. Destiny made a timely election four years ago to accelerate income recognition with respect to the 600 shares of restricted stock. On July 1 of the current year, Destiny, who was still employed by Bema, sold all 600 shares for $26,000. How much compensation income is recognized in the current year?

View Explanation

View Explanation

Verified Answer
Please login to view
Step-by-Step Analysis
The key concept here is the 83(b) election for restricted stock. Destiny made an 83(b) election four years ago to accelerate income recognition for the 600 shares. Option analysis is not presented as multiple choices in this case, but we can reason through the situation step by step. - At grant (four years ago), the stock......Login to view full explanation

Log in for full answers

We've collected over 50,000 authentic exam questions and detailed explanations from around the globe. Log in now and get instant access to the answers!

Similar Questions

Myers Inc. decided to grant stock options as part of their managers' compensation. The company grants 15,000 stock options on January 1, 2013 to a manager. The fair value of each option at the grant date is $3 per share and the exercise price is equal to the current market value of $15. The vesting period is 4 years and the expiration date is January 1, 2019. On January 1, 2018, the manager exercises the stock options (the market value is $23). By how much will Total Shareholder's Equity increase as a result of this transaction?

Copeworth Health, a publicly traded healthcare provider operating across the southeastern United States, partially compensates its executives using stock options. In the current period, Copeworth issues 5,000 options to purchase $1 par value common stock for $5 per share which is the current market price of the share. The vesting period is 2 years. Using the Black-Scholes options pricing model, Copeworth values the options at $2 each. How should Copeworth recognize this compensation expense?

Part 1On January​ 1, Year​ 1, Sweeney Company granted an employee options to purchase 100 shares of​ Sweeney's common stock at​ $40 per share. The options became exercisable on December​ 31, Year​ 1, after the employee had completed 1 year of service and were exercised on that date. Market prices of the stock and fair values of the options were as​ follows:[table] | Market Price of Stock | Fair Value of Options January​ 1, Year 1 | ​$50 | ​$61 December​ 31, Year 1 | ​$65 | ​$75 [/table]What amount should Sweeney recognize as compensation cost for Year​ 1? Part 1 A. ​$2,100 B. ​$4,000 C. ​$6,100 D. ​$0

Part 1On January​ 1, Year​ 1, Axis Corporation granted employees 45,50045,500 stock options for 45,50045,500 shares of $ 1$1 par value common stock. The exercise price on the date of issue was equal to the market price of $ 20$20. There is a two year vesting period and the options expire in four years. Employees have the right to sell back the shares to the corporation within six months of exercise. At the time of​ issue, the fair value of the options is estimated to be $ 32$32 per option.​ Unfortunately, the company experiences a series of setbacks and the stock price falls in Year 4. At December​ 31, Year​ 4, the options have a fair value of $ 16$16 per option. At the end of four​ years, none of the options have been exercised. What is the appropriate journal entry to record the expiration of the​ options? Part 1 A. [table] APIC minus− Expired Stock Options | 1,456,0001,456,000 | Compensation Expense | | 1,456,0001,456,000 [/table] B. [table] Liability for Stockminus−based Compensation | 728,000728,000 | APIC minus− Expired Stock Options | | 728,000728,000 [/table] C. [table] APIC minus− Expired Stock Options | 728,000728,000 | Compensation Expense | | 728,000728,000 [/table] D. [table] Liability for Stockminus−based Compensation | 728,000728,000 | Common Stock | | 45,50045,500 APIC minus− Common | | 682,500682,500 [/table]

More Practical Tools for Students Powered by AI Study Helper

Join us and instantly unlock extensive past papers & exclusive solutions to get a head start on your studies!