Analyzing Stock$-$Based Compensation

Hearne Inc. began business on March $1,2020.$ At that time, it granted $250,000$ options, with a strike

price of $$5,$ to computer engineers in lieu of signing bonuses. The fair value of each option was esti$-$

mated at $$1$ and the options vest over four years.

$a.$ What benefits did Hearne create by granting options to the engineers instead of cash signing

bonuses?

b$.$ What is the total expense that the company will record associated with the options granted in $2020?$

c$.$ What will Hearne record in $2020$ for stock$-$option compensation expense?

$d.$ How will the exercise of the options impact the balance sheet, income statement, and statement of

cash flows?