Orange Inc. issued 20,000 nonqualified stock options valued at $40,000 (in total). The options vest over two

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Question:

Orange Inc. issued 20,000 nonqualified stock options valued at $40,000 (in total). The options vest over two years—half in 2016 (the year of issue) and half in 2017. One thousand options are exercised in 2017 with a bargain element on each option of $6. What is the 2017 book-tax difference associated with the stock options?

A. $14,000 unfavorable.

B. $14,000 favorable.

C. $20,000 unfavorable.

D. $20,000 favorable.

E. None of the choices are correct.