Mirasol Corporation Granted an Incentive Stock Option to Employee Josephine

question 72

Multiple Choice

Mirasol Corporation granted an incentive stock option to employee Josephine two years ago.The option price was $150 and the FMV of the Mirasol stock was also $150 on the grant date.The option allowed Josephine to purchase 160 shares of Mirasol stock.Josephine exercised the option this year when the stock's FMV was $250.Unless otherwise stated,assume Josephine is a qualifying employee.The results of the above transactions to Mirasol Corporation will be

• A)no compensation deduction.
• B)a compensation deduction of $16,000 on the grant date.
• C)a tax preference item of $16,000 on the exercise date.
• D)a compensation deduction of $16,000 on the exercise date.

---

Definitions:

Tobacco Industry

The sector of the economy involved in the production, marketing, and sale of tobacco and tobacco-related products.

Indentured Servitude

A labor system where individuals worked for a specific period of time to pay off a debt, such as passage to the New World, without receiving wages.

King James

Refers to King James VI of Scotland and I of England and Ireland, known for the authorization of the King James Version of the Bible in 1611.