Orange Inc. issued 20,000 nonqualified stock options valued at $20,000 (in total). The options vest over two years-half in 2019 (the year of issue) and half in 2020. One thousand options are exercised in 2020 with a bargain element on each option of $6. What is the 2020 book-tax difference associated with the stock options?

Orange Inc. issued 20,000 nonqualified stock options valued at $20,000 (in total). The options vest over two years-half in 2019 (the year of issue) and half in 2020. One thousand options are exercised in 2020 with a bargain element on each option of $6. What is the 2020 book-tax difference associated with the stock options?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Part I:

A) $15,000 favorable
B) $ 6,000 favorable
C) $15,000 unfavorable
D) $ 4,000 unfavorable

Part II:

What is the permanent difference related to this exercise of 1,000 option?

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