On January 2, 2020, for Past Services Rendered, Zeus Corp

question 50

Multiple Choice

On January 2, 2020, for past services rendered, Zeus Corp. granted Joanna Wood, its president, 18,000 stock appreciation rights that are exercisable immediately and expire on January 2, 2021. On exercise, Wood is entitled to receive cash for the excess of the market price of the shares on the exercise date over the market price on the grant date. Wood did NOT exercise any of the rights during 2020. The market price of Zeus's shares was $ 35 on January 2, 2020, and $ 45 on December 31, 2020. As a result of the stock appreciation rights, Zeus should recognize compensation expense for 2020 of

• A) $ 0.
• B) $ 180,000.
• C) $ 630,000.
• D) $ 810,000.

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Definitions:

Economic Profit

Total revenues minus explicit and implicit costs, representing the return on investment beyond the normal expected return.

Normal Profit

The level of profit that is necessary for a company to remain competitive in the market, often seen as the minimum acceptable return.

Allocative Inefficiency

A situation where resources are not allocated optimally, leading to a loss of economic efficiency.

Marginal Cost

The incremental cost involved in producing one more unit of a good or service.