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allsm [11]
3 years ago
8

On July 1, 2010, Ellison Company granted Sam Wine, an employee, an option to buy 400 shares of Ellison Co. stock for $30 per sha

re, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $1,800. Wine exercised his option on October 1, 2010 and sold his 400 shares on December 1, 2010. Quoted market prices of Ellison Co. stock in 2010 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, 2010. As a result of the option granted to Wine, using the fair value method, Ellison should recognize compensation expense on its books in the amount of

a. $1,800.
b. $600.
c. $450.
d. $0.
Business
1 answer:
gregori [183]3 years ago
3 0

Answer:

Ellison Company should recognize compensation expense on its books in the amount of $600

Explanation:

Solution

The transaction in the books of Ellison Company during the period of July 1st 2010 to December 31st 2010

On July 1st the share value was $30 *400 =  12000

On October 1st 2010 sold at $ 36 * 400 =  14400

The gain on this transaction was = $2,400          

31st July 2010, less compensation expenses =$ 1,800    

The fair vale to be recorded as a gain = $ 600

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5 0
1 year ago
The Cole Beverage Company (CBC) has a soft drink product that has a constant annual demand of 3,600 cases per year. A case of th
skad [1K]

Answer:

a. 480

Explanation:

The computation of the economic order quantity is given below:

EOQ = \sqrt{\frac{2\times annual \ demand \times ordering\ cost }{carrying \ cost}}  \\\\= \sqrt{\frac{2\times 3600\times \$32}{\$1} }

= 480 units

The carrying cost could be determined below:

= $4 × 25%

= $1

hence, the carrying cost is $1

Therefore the economic order quantity is 480

Thus, the correct option is a.

7 0
2 years ago
Stock A has an expected return of 17.8 percent, and Stock B has an expected return of 9.6 percent. However, the risk of Stock A
MrRissso [65]

Answer:

13.70%

Explanation:

The expected return of a portfolio is said to be the weighted average of the returns of the individual components,

Given that:

Stock A has an expected return = 17.8%

Stock B has an expected return = 9.6%

the risk of Stock A as measured by its variance is 3 times that of Stock B.

If the two stocks are combined equally in a portfolio;

Then :

The weight of both stocks will be 50% : 50 %

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Expected return for stock B = 0.50 × 9.6%

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Expected return of the portfolio =  13.70%

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