This year, Gogo, Incorporated granted a nonqualified stock option to Mwana to buy 10,000 shares of...

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This year, Gogo, Incorporated granted a nonqualified stock option to Mwana to buy 10,000 shares of Gogo stock for $8 per share for five years. At date of grant, Gogo stock was selling on a regional securities market for $7.87 per share. Gogo recorded $26,700 compensation expense for the estimated value of the option. Five years after the option grant, Mwana exercised the option when Gogo stock was selling for $10.31 per share. Required: a. How much income must Mwana recognize in the year of exercise? b. What is Gogo's tax deduction in the year of exercise? c. Assuming a 21 percent tax rate, what is the effect of the exercise on Gogo's book income and deferred taxes? * Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Assuming a 21 percent tax rate, what is the effect of the exercise on Gogo's book income and deferred taxes? Note: Leave no cells blank - be certain to enter "0" wherever required. Amount Gogo's book income Deferred tax asset No effect $ 23,100 decrease by $ 26,700 This year, Gogo, Incorporated granted a nonqualified stock option to Mwana to buy 10,000 shares of Gogo stock for $8 per share for five years. At date of grant, Gogo stock was selling on a regional securities market for $7.87 per share. Gogo recorded $26,700 compensation expense for the estimated value of the option. Five years after the option grant, Mwana exercised the option when Gogo stock was selling for $10.31 per share. Required: a. How much income must Mwana recognize in the year of exercise? b. What is Gogo's tax deduction in the year of exercise? c. Assuming a 21 percent tax rate, what is the effect of the exercise on Gogo's book income and deferred taxes? * Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Assuming a 21 percent tax rate, what is the effect of the exercise on Gogo's book income and deferred taxes? Note: Leave no cells blank - be certain to enter "0" wherever required. Amount Gogo's book income Deferred tax asset No effect $ 23,100 decrease by $ 26,700

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Gogo Stock Option Exercise Tax Implications a Mwanas Income in Year of Exercise The difference betwe... View the full answer