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gladu [14]
2 years ago
7

This year, Gogo Inc. granted a nonqualified stock option to Mrs. Mill to buy 10,000 shares of Gogo stock for $8 per share for fi

ve years. At date of grant, Gogo stock was selling on a regional securities market for $7.87 per share. Gogo recorded $26,700 compensation expense for the estimated value of the option. Five years after Gogo granted the option to Mrs. Mill, she exercised it on a day when Gogo stock was selling for $10.31 per share. Required: How much income must Mrs. Mill recognize in the year of exercise
Business
1 answer:
Anton [14]2 years ago
8 0

Answer:

Gogo Inc. and Mrs. Mill

The Income that Mrs. Mill must recognize in the year of exercise is:

= $23,100

Explanation:

a) Data and Calculations:

Options given to Mrs. Mill = 10,000 shares of Gogo stock

Exercise price of the options = $8 per share

Period of option exercise = 5 years

Selling price of shares at grant date = $7.87

Selling price of shares at exercise date = $10.31

Compensation expense recorded by Gogo = $26,700

Cost of options to Mrs. Mill = $80,000 (10,000 * $8)

Income that Mrs. Mill must recognize in the year of exercise = $23,100 ($10.31 - $8) * 10,000

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