Problem: As compensation for helping start the import business, I have been offered 100 shares of stock under a stock option plan. I exercised these options recently at $45 when the market price was $60. I was interested in how the stock option program will affect my Corporation. Include the following in your answer:
1. Discuss the two GAAP accounting methods for these types of entities and what the difference is for each method.
2. What the amount of compensation is for the options exercised? Be sure to explain how I can arrive at this value.
3. How do I record this gain on my books?