Assume that on January 1, year 1, ABC Incorporated issued 9,900 stock options with an estimated...
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Assume that on January 1, year 1, ABC Incorporated issued 9,900 stock options with an estimated value of $18 per option. Each option entitles the owner to purchase one share of ABC stock for $34 a share (the per share price of ABC stock on January 1, year 1, when the options were granted). The options vest at the end of the day on December 31, year 2. All 9,900 stock options were exercised in year 3 when the ABC stock was valued at $37 per share. Identify ABC's year 1, 2, and 3 tax deductions and book-tax differences (indicate as favorable or unfavorable and as permanent or temporary) associated with the stock options under the following alternative scenarios: Required: a. The stock options are incentive stock options. b. The stock options are nonqualified stock options. Complete the following table. Note: For all requirements, leave no answer blank. Enter zero if applicable and select "Not Applicable" if no effect. Under ASC 718 a. Incentive Stock Options b. Nonqualified Stock Options (temporary differences) b. Nonqualified Stock Options (permanent differences) Book-Tax differences Year 1 Favorable or Unfavorable Temporary or Book-Tax Permanent differences Year 2 Favorable or Unfavorable Temporary or Permanent Book-Tax differences Year 3 Favorable or Unfavorable Assume that on January 1, year 1, ABC Incorporated issued 9,900 stock options with an estimated value of $18 per option. Each option entitles the owner to purchase one share of ABC stock for $34 a share (the per share price of ABC stock on January 1, year 1, when the options were granted). The options vest at the end of the day on December 31, year 2. All 9,900 stock options were exercised in year 3 when the ABC stock was valued at $37 per share. Identify ABC's year 1, 2, and 3 tax deductions and book-tax differences (indicate as favorable or unfavorable and as permanent or temporary) associated with the stock options under the following alternative scenarios: Required: a. The stock options are incentive stock options. b. The stock options are nonqualified stock options. Complete the following table. Note: For all requirements, leave no answer blank. Enter zero if applicable and select "Not Applicable" if no effect. Under ASC 718 a. Incentive Stock Options b. Nonqualified Stock Options (temporary differences) b. Nonqualified Stock Options (permanent differences) Book-Tax differences Year 1 Favorable or Unfavorable Temporary or Book-Tax Permanent differences Year 2 Favorable or Unfavorable Temporary or Permanent Book-Tax differences Year 3 Favorable or Unfavorable
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Under ASC 718 a Incentive stock Options BookTax Diff Year1 89 100 9900X50 X 18 b Nonqualif... View the full answer
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
Posted Date:
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