On January 1, 2014, a company granted Mark Gotti, an employee, an option to buy 1,000 shares of the company stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $4,500. Gotti exercised his option on October 1, 2014 and sold his 1,000 shares on December 1, 2014. Quoted market prices of the company's stock in 2014 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, 2014. As a result of the option granted to Gotti, using the fair value method, the company should recognize compensation expense for 2014 on its books in the amount of?

2

On May 1, 2014, a company issued $1,500,000 of 7% bonds at 103, which are due on April 30, 2024. Twenty detachable stock warrants entitling the holder to purchase for $40 one share of the company's common stock, $15 par value, were attached to each $1,000 bond. The bonds without the warrants would sell at 96. On May 1, 2014, the fair value of the company's common stock was $35 per share and of the warrants was $2. On May 1, 2014, the company should record the bonds with a ? and On May 1, 2014, the company should credit Paid-in Capital from Stock Warrants for ?

3Stock option plans can be compensatory or non-compensatory. The characteristics of each type of plan are different. Which of the following is not a characteristic of a non-compensatory stock option plan?

4A company would like to encourage its convertible bondholders to exercise their conversion privileges. Therefore, the company will offer the bondholders something called a(an):

5

A company had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 5% convertible bonds outstanding during 2015. The preferred stock is convertible into 40,000 shares of common stock. During 2015, the company paid dividends of $.60 per share on the common stock and $2 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2015 was $400,000 and the income tax rate was 30%. Diluted earnings per share for 2015 is (rounded to the nearest penny)