On January 1,2016,D Corp

question 36

Multiple Choice

On January 1,2016,D Corp.granted an employee an option to purchase 6,000 shares of D's $5 par common stock at $20 per share.The options became exercisable on December 31,2017,after the employee completed two years of service.The option was exercised on January 10,2018.The market prices of D's stock were as follows: January 1,2016,$30;December 31,2017,$50;and January 10,2018,$45.An option pricing model estimated the value of the options at $8 each on the grant date.For 2016,D should recognize compensation expense of:

• A)$ 0.
• B)$24,000.
• C)$30,000.
• D)$60,000.

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Definitions:

Price Inelastic

A characteristic of goods for which demand does not significantly change with a change in price.

Demand

The desire and ability of consumers to purchase goods and services at different prices, reflecting the relationship between price levels and quantity demanded.

Rising Health Care Costs

The increasing expense associated with medical services and products, affecting individuals, families, businesses, and governments.

Budgets

Financial plans detailing projected income versus expenditures over a specific period.