In Order to Retain Certain Key Executives, Jensen Corporation Granted

question 90

Multiple Choice

In order to retain certain key executives, Jensen Corporation granted them incentive stock options on December 31, 2014. 90,000 options were granted at an option price of $35 per share. Market prices of the stock were as follows: The options were granted as compensation for executives' services to be rendered over a two-year period beginning January 1, 2015. The Black-Scholes option pricing model determines total compensation expense to be $900,000. What amount of compensation expense should Jensen recognize as a result of this plan for the year endedDecember 31, 2015 under the fair value method?

• A) $450,000.
• B) $900,000.
• C) $990,000.
• D) $3,150,000.

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Definitions:

Marginal Benefit

The extra benefit or satisfaction derived from the consumption of an additional unit of a good or service.

Crime Control

Strategies and measures implemented to reduce crime, protect public safety, and maintain social order.

Net Benefit

The total positive impact or gain of a decision, action, or project after subtracting any associated costs.

Social Program

Government initiatives designed to provide support and improve living standards for its citizens, including welfare, healthcare, and education services.