Questions 20 to 23 are based on the following information: On January 1, 2016, Telespace Inc. grants 12 million stock options to its employees. The stock options have exercise price of $20, which is equal to the grant-date price. All options will vest in three years. The grant date fair value of the options is $15 per option. All 12

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
How much is the deferred tax to be recognized in year 2017? Answer is “deferred tax asset of $18 million”. Please explain the reasoning and calculations.
Questions 20 to 23 are based on the following information:
On January 1, 2016, Telespace Inc. grants 12 million stock options to its employees. The
stock options have exercise price of $20, which is equal to the grant-date price. All options
will vest in three years. The grant date fair value of the options is $15 per option. All 12
Transcribed Image Text:Questions 20 to 23 are based on the following information: On January 1, 2016, Telespace Inc. grants 12 million stock options to its employees. The stock options have exercise price of $20, which is equal to the grant-date price. All options will vest in three years. The grant date fair value of the options is $15 per option. All 12
million options are expected to vest. On January 2, 2019, all 12 million vested options are
exercised when the stock price is $60. The applicable tax rate for all periods is 30%. The
company has sufficient taxable income for the stock option tax deductions to reduce income
taxes payable in all periods.
Transcribed Image Text:million options are expected to vest. On January 2, 2019, all 12 million vested options are exercised when the stock price is $60. The applicable tax rate for all periods is 30%. The company has sufficient taxable income for the stock option tax deductions to reduce income taxes payable in all periods.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education