How much tax expense is recognized for 2011 if the fair, Ask an Expert

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The Johnson Co. grants options on 5,000 shares of its common stock. The fair market value of each option on the grant date is $3 per share. The exercise price is $2. The tax rate (all years) is 20%. The options were exercise in 2011. Pretax income for 2011 was $50,000.

a) How much tax expense is recognized for 2011 if the fair market value of the stock on the exercise date was $3 per share?

b) How much tax expense is recognized to 2011 is the fair market value of Johnson's stock on the exercise date was $11 per share?

c) How much income tax expense is recognized by Johnson for 2011 if the market price of the stock on the exercise date is $5.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M949968

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