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:

Inflation

An economic condition marked by a sustained increase in the general price level of goods and services in an economy over a period of time.

Government Purchases

Expenditures by government entities for goods and services that directly satisfy public consumption or are invested in public infrastructure.

GDP

Gross Domestic Product (GDP) measures the total value of all goods and services produced within a country's borders in a specific time period, serving as a broad indicator of its economic performance.

Net Exports

The value of a country's total exports minus its total imports.