Under Its Executive Stock Option Plan, N Corporation Granted Options

question 126

Multiple Choice

Under its executive stock option plan, N Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date) . The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives?

• A) $0.
• B) $20 million.
• C) $60 million.
• D) $90 million.

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Definitions:

Closing Entries

At the close of an accounting period, recordings are made to move balances from temporary accounts to those that are permanent.

Adjustment Columns

Special columns found in accounting ledgers and worksheets used for making necessary modifications to accounts at the end of a reporting period.

Depreciation Expense

The cost allocated over the useful life of a tangible asset to account for its decline in value due to use and time.

Accumulated Depreciation

The total depreciation for a fixed asset that has been charged to expense since the asset was acquired and available for use.