Yellow Company Is a Calendar-Year Firm with Operations in Several

question 20

Multiple Choice

Yellow Company is a calendar-year firm with operations in several countries. At January 1, 2013, the company had issued 40,000 executive stock options permitting executives to buy 40,000 shares of stock for $30. The vesting schedule is 20% the first year, 30% the second year, and 50% the third year (graded-vesting) . The fair value of the options is estimated as follows: Assuming Yellow prepares its financial statements in accordance with International Financial Reporting Standards, what is the compensation expense related to the options to be recorded in 2014?

• A)$40,000.
• B)$60,000.
• C)$95,000.
• D)$130,000.

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Definitions:

Total Output

The total quantity of goods or services produced by an economy or a firm within a specific period.

Marginal Product

The additional output produced by adding one more unit of a specific input, holding all other inputs constant.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent or salaries.

Hail Insurance

A type of insurance policy specifically designed to protect crops from hail damage.