Question

This year, Haven Corporation granted a nonqualified stock option to Olivia to buy 5,000 shares of...

This year, Haven Corporation granted a nonqualified stock option to Olivia to buy 5,000 shares of Haven stock for $20 for five years. At date of grant, Haven stock was selling on the Nasdaq for $19 per share. For financial statement purposes, Haven recorded $16,500 compensation expense for the estimated value of the option.

  1. How much income must Olivia recognize as a result of the grant of the option?
  2. Can Haven deduct the $16,500 compensation expense on this year's tax return?
  3. Assuming a 21% tax rate, compute Haven's deferred tax asset or deferred tax liability (identify which) resulting from the $16,500 compensation expense.
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Hi

Let me know in case you face any issue:

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Salem Corporation granted a nonqualified stock option to employee Andi on January 1, 2015. The option...
Salem Corporation granted a nonqualified stock option to employee Andi on January 1, 2015. The option price was $175, and the FMV of the Salem stock was also $175 on the grant date. The option allowed Andi to purchase 500 shares of Salem stock. The option itself does not have a readily ascertainable FMV. Andi exercised the option on July 1, 2018, when the stock's FMV was $225. If Andi sells the stock on August 1, 2019, for $250 per...
On January 1, 2021, Marigold Corp. granted Tim Telfer, an employee, an option to buy 5100...
On January 1, 2021, Marigold Corp. granted Tim Telfer, an employee, an option to buy 5100 shares of Marigold Co. stock for $25 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $32700. Telfer exercised his option on September 1, 2021, and sold his 5100 shares on December 1, 2021. Quoted market prices of Marigold Co. stock during 2021 were January 1 $24...
Wilson Corporation granted an incentive stock option to Reva on January 1, 2018. The option price...
Wilson Corporation granted an incentive stock option to Reva on January 1, 2018. The option price was $300, and the FMV of the Wilson stock was also $300 on the grant date. The option allowed Reva to purchase 150 shares of Wilson stock. Reva exercised the option on August 1, 2020, when the stock's FMV was $400. Reva sells the stock on December 5, 2021 for $450 per share. Determine the amount and character(i.e., ordinary, LTCG or STCG) of income...
In 2017, an employee was granted 5,000 options to purchase shares of stock with an exercise...
In 2017, an employee was granted 5,000 options to purchase shares of stock with an exercise price of $16.00 per share. In 2017, stock option expense was recorded in the after-tax amount of $2.50 per share. In 2020, when the shares were trading at $20.00 per share, the options were exercised. The firm’s marginal tax rate is 22%. According to GAAP, the difference between the stock option expense originally recorded in the financial statements and the true cost of the...
Martin Corporation granted an incentive stock option to employee Caroline on January 1, 2013. The option...
Martin Corporation granted an incentive stock option to employee Caroline on January 1, 2013. The option price was $150, and the FMV of the Martin stock was also $150 on the grant date. The option allowed Caroline to purchase 160 shares of Martin stock. Caroline exercised the option on August 1, 2017, when the stock's FMV was $250. Unless otherwise stated, assume Caroline is a qualifying employee. If Caroline sells the stock on September 5, 2019, for $350 per share,...
Under its executive stock option plan, National Corporation granted 12 million options on January 1, 2021,...
Under its executive stock option plan, National Corporation granted 12 million options on January 1, 2021, that permit executives to purchase 12 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $16 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Suppose...
Under its executive stock option plan, National Corporation granted 12 million options on January 1, 2021,...
Under its executive stock option plan, National Corporation granted 12 million options on January 1, 2021, that permit executives to purchase 12 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $17 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. Suppose...
Under its executive stock option plan, National Corporation granted 18 million options on January 1, 2021,...
Under its executive stock option plan, National Corporation granted 18 million options on January 1, 2021, that permit executives to purchase 18 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $15 per share. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. Suppose...
On November 1, 2017, Sunland Company adopted a stock-option plan that granted options to key executives...
On November 1, 2017, Sunland Company adopted a stock-option plan that granted options to key executives to purchase 21,900 shares of the company’s $9 par value common stock. The options were granted on January 2, 2018, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $50, and the fair value option-pricing model determines the...
On November 1, 2020, Whispering Company adopted a stock-option plan that granted options to key executives...
On November 1, 2020, Whispering Company adopted a stock-option plan that granted options to key executives to purchase 33,900 shares of the company’s $10 par value common stock. The options were granted on January 2, 2021, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $30, and the fair value option-pricing model determines the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT