Bad Brad Received 20 NQOs (Each Option Gives Him the Right

question 34

Multiple Choice

Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $12 per share) from his employer. At the time he started working, the stock price was $11 per share. Now that the share price is $25 per share, he exercises all of the options. Two years later Bad Brad sells the stock for $27 per share. What is Bad Brad's basis in his stock for purposes of calculating the gain or loss at the time of the sale?

• A) $7,200.
• B) $7,800.
• C) $15,000.
• D) $16,200.

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Definitions:

GAAP

Generally Accepted Accounting Principles; a set of accounting standards, principles, and procedures that companies must follow when compiling their financial statements in the U.S.

Balance Sheet

A financial report that captures a company's financial status at a particular moment, detailing its assets, liabilities, and shareholders' equity.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that guide the preparation and presentation of financial statements on a global scale.

GAAP Format

The presentation of financial statements in accordance with Generally Accepted Accounting Principles, ensuring consistency and comparability.