6. On January 1, 2008, Waddle Company adopted a compensatory stock option plan and granted its managers 10,000 options to buy shares of common stock; each option can be used to acquire a share of common stock at a price of $25 a share. The fair value of each option was $7.50 on January 1, 2008. The options can be converted into common stock after July 1, 2011. The required service period is three years. How much compensation expense will be recorded for the year ending December 31, 2010 assuming that the fair value approach is used? a) $75,000 b) $175,000 c) $50,000 d) $25,000 7. Cash dividends paid by a corporation: a) are an expense of the corporation that declared the dividend. b) reduces the net income of the corporation that declared the dividend. c) reduces the retained earnings of the corporation that declared the dividend. d) reduces the retained earnings of the corporation that declared the dividend because net income is reduced by the amount of the dividend. 8. When an investor owns less than 20 percent of the investee company, the investor may still be able to exert influence over the investee company if the other stock is: a) closely held by a few investors. b) widely distributed across a few investors. c) widely distributed across a large number of individual investors. d) controlled a small group of investors. 9. Cash flows arising from the purchase or sale of marketable securities are cash flows from ________________ activities. a) investing b) operating c) financing d) research