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:

Stockholders' Equity

The portion of a company's assets that belongs to the shareholders after debts and liabilities have been settled.

Common Stock

Shares representing ownership in a company, entitling holders to vote at shareholder meetings and receive dividends.

Net Income

The conclusive earnings a company retains after all operational costs and taxes are taken away from the revenues.

Statement of Cash Flows

A financial document that provides a summary of the cash inflows and outflows for a company over a specific period of time, showing how it raises and spends money.