On January 1, 2014, a company granted Mark Gotti, an employee, an option to buy 1,000 shares of the company stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $4,500. Gotti exercised his option on October 1, 2014 and sold his 1,000 shares on December 1, 2014. Quoted market prices of the company's stock in 2014 were:
July 1 $30 per share
October 1 $36 per share
December 1 $40 per share
The service period is for three years beginning January 1, 2014. As a result of the option granted to Gotti, using the fair value method, the company should recognize compensation expense for 2014 on its books in the amount of?
2.On May 1, 2014, a company issued $1,500,000 of 7% bonds at 103, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of the company's common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of the company's common stock was $35 per share and of the warrants was $2.
On May 1, 2014, the company should record the bonds with a ? and On May 1, 2014, the company should credit Paid-in Capital from Stock Warrants for ?
3.Stock option plans can be compensatory or non-compensatory. The characteristics of each type of plan are different. Which of the following is not a characteristic of a non-compensatory stock option plan?
4.A company would like to encourage its convertible bondholders to exercise their conversion privileges. Therefore, the company will offer the bondholders something called a(an):
5.A company had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 5% convertible bonds outstanding during 2015. The preferred stock is convertible into 40,000 shares of common stock. During 2015, the company paid dividends of $.60 per share on the common stock and $2 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2015 was $400,000 and the income tax rate was 30%.
Diluted earnings per share for 2015 is (rounded to the nearest penny)