FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 12: Compensation

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

How is the bargain element for a stock option calculated?

A) The difference between the strike price and the market price on the date of grant.
B) The difference between the market price on the exercise date and the market price on the date of grant.
C) The difference between the market price on the exercise date and the strike price.
D) The difference between the market price on the sale date and the strike pricE.The bargain element is simply the difference between the market price on the exercise date and the strike price.

E) A) and B)
F) All of the above

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following refers to the date stock options are awarded to an employee?

A) Grant date.
B) Exercise date.
C) Lapse date.
D) Vesting datE.The grant date is the date on which an employee receives the stock options.

E) All of the above
F) A) and B)

Correct Answer

verified

Show Answer

Question 23

True/False

Review LaterAdd Note

Employers computing taxable income receive a deduction for reasonable salary and wages paid to employees.

Which of the following statements regarding income tax withholding is incorrect?

Kaijsa received 20 NQOs (each option gives her the right to purchase 30 shares of stock for $8 per share) from her employer at the time she started working when the stock price was $9 per share. Now that the share price is $18 per share, she intends to exercise all of her options. If Kaijsa holds the shares for two years and sells them when the market price is $25, what is the amount of the deduction and tax savings her employer will receive? (assume the employer's marginal tax rate is 30 percent)

Which of the items is not correct regarding withholding?

Big Bucks, a publicly traded corporation, paid its CEO $1,500,000 of base compensation for the year. What is the after-tax cost of paying the salary assuming a 30 percent marginal tax rate?

Hotel employees can receive free nights lodging on a space available basis without incurring compensation.

Which of the following is not a purpose of equity-based compensation?

An employee's income with respect to restricted stock is the fair market value on the vesting date.

Group-term life insurance is a fringe benefit that can be partially taxable and partially tax free.

The use of restricted stock is increasing relative to the use of stock options.

An employee can indicate whether they want an additional amount withheld for payroll taxes on the Form W-4.

Which of the following pairs of items is not needed to calculate the after-tax proceeds for a same-day sale?

Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.

Which of the following is a fringe benefit that employers can discriminate among employees?

Which of the following statements concerning cafeteria plans is true?

Aharon exercises 10 stock options awarded several years ago. The following information pertains to the options: (1) each option gives the employee the right to buy 10 shares, (2) the market price on the grant date was $7, (3) the strike price is $10, and (4) the market price on the exercise date was $15. How much will it cost Aharon to purchase the options on the exercise date?

A section 83(b) election freezes the value of restricted stock for compensation purposes on the vesting date.

Frederique works for a furniture retailer. The shop allows all employees to purchase 10 pieces of furniture per year at a discount. This year Frederique purchased eight pieces. She gave three pieces as a gift to her brother as a wedding present. Her employer's average gross profit percentage is 25 percent. Each piece was 20 percent off of normal retail prices and in all cases the employee price exceeded the employer's cost. What amount of the discount must be included in Frederique's income?