Question

Martin Corp. permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can be purchased at a 15% discount. During 2021, employees purchased 12 million shares; during this same period, the shares had a market price of $15 per share at the end of the year. Martin's 2021 pretax earnings will be reduced by:

Answer 1

Answer:

$27 million

Explanation:

Calculation to determine what Martin's 2021 pretax earnings will be reduced by:

Cash $153 million

($15 x 12 million x 85%)

Compensation expense $27 million

($15 x 12 million x 15%)

Common stock $180 million

($15 x 12 million)

Therefore Martin's 2021 pretax earnings will be reduced by:$27 million