Martin Corporation Granted a Nonqualified Stock Option to Employee Caroline

question 7

Multiple Choice

Martin Corporation granted a nonqualified stock option to employee Caroline on January 1,2011.The option price was $150,and the FMV of the Martin stock was also $150 on the grant date.The option allowed Caroline to purchase 1,000 shares of Martin stock.The option itself does not have a readily ascertainable FMV.Caroline exercised the option on August 1,2013 when the stock's FMV was $250.Caroline sells the stock on September 5,2014 for $300 per share.Martin Corporation will be allowed a deduction of

• A)$150,000 in 2011.
• B)$100,000 in 2013.
• C)$50,000 in 2014.
• D)$100,000 in 2013 and $50,000 in 2014.

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Definitions:

Inflation

An overall uptick in price levels and a decline in the value of money.

Liberal Economist

An economist advocating for policies promoting free market principles, minimal government intervention, and individual liberties in economic matters.

Government Spending Cuts

Government Spending Cuts involve the reduction of public sector expenditure in an attempt to balance budgets and reduce deficits.

Multiplier

In economics, it refers to the factor by which gains in total output are greater than the change in spending that caused it.