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59.     On January 1, 2008, Porter Company granted stock options to officers and key employees for the purchase of 10,000 shares of the company's $1 par common stock at $20 per share as additional compensation for services to be rendered over the next three years. The options are exercisable during a five-year period beginning January 1, 2011 by grantees still employed by Porter. The Black-Scholes option pricing model determines total compensation expense to be $90,000. The market price of common stock was $26 per share at the date of grant. The journal entry to record the compensation expense related to these options for 2008 would include a credit to the Paid-in Capital—Stock Options account for
a.     $0.
b.     $18,000.
c.     $20,000.
d.     $30,000.


     60.     On January 1, 2008, Downs Company granted Tim Wright, an employee, an option to buy 1,000 shares of Downs Co. stock for $25 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 $7,500. Wright exercised his option on September 1, 2008, and sold his 1,000 shares on December 1, 2008. Quoted market prices of Downs Co. stock during 2008 were
January 1     $25 per share
September 1     $30 per share
December 1     $34 per share
The service period is for three years beginning January 1, 2008. As a result of the option granted to Wright, using the fair value method, Downs should recognize compensation expense for 2008 on its books in the amount of
a.     $9,000.
b.     $7,500.
c.     $2,500.
d.     $1,500.

     61.     On December 31, 2007, Filmore Company granted some of its executives options to purchase 50,000 shares of the company's $10 par common stock at an option price of $50 per share. The options become exercisable on January 1, 2008, and represent compensation for executives' services over a three-year period beginning January 1, 2008. The Black-Scholes option pricing model determines total compensation expense to be $300,000. At December 31, 2008, none of the executives had exercised their options. What is the impact on Filmore's net income for the year ended December 31, 2008 as a result of this transaction under the fair value method?
a.     $100,000 increase
b.     $0
c.     $100,000 decrease
d.     $300,000 decrease

     62.     Yunger Corp. on January 1, 2004, granted stock options for 40,000 shares of its $10 par value common stock to its key employees. The market price of the common stock on that date was $23 per share and the option price was $20. The Black-Scholes option pricing model determines total compensation expense to be $240,000. The options are exercisable beginning January 1, 2007, provided those key employees are still in Yunger’s employ at the time the options are exercised. The options expire on January 1, 2008.
On January 1, 2007, when the market price of the stock was $29 per share, all 40,000 options were exercised. The amount of compensation expense Yunger should record for 2006 under the fair value method is
a.     $0.
b.     $40,000.
c.     $80,000.
d.     $120,000.

     63.     On December 31, 2007, Jansen Company granted some of its executives options to purchase 45,000 shares of the company's $50 par common stock at an option price of $60 per share. The Black-Scholes option pricing model determines total compensation expense to be $900,000. The options become exercisable on January 1, 2008, and represent compensation for executives' past and future services over a three-year period beginning January 1, 2008. What is the impact on Jansen's total stockholders' equity for the year ended December 31, 2007, as a result of this transaction under the fair value method?
a.     $900,000 decrease
b.     $300,000 decrease
c.     $0
d.     $300,000 increase

     64.     On June 30, 2004, Sealey Corporation granted compensatory stock options for 30,000 shares of its $20 par value common stock to certain of its key employees. The market price of the common stock on that date was $36 per share and the option price was $30. The Black-Scholes option pricing model determines total compensation expense to be $360,000. The options are exercisable beginning January 1, 2007, provided those key employees are still in Sealey’s employ at the time the options are exercised. The options expire on June 30, 2008.
On January 4, 2007, when the market price of the stock was $42 per share, all 30,000 options were exercised. What should be the amount of compensation expense recorded by Sealey Corporation for the calendar year 2006 using the fair value method?
a.     $0.
b.     $144,000.
c.     $180,000.
d.     $360,000.

     65.     In order to retain certain key executives, Tanner Corporation granted them incentive stock options on December 31, 2006. 50,000 options were granted at an option price of $35 per share. Market prices of the stock were as follows:
December 31, 2007     $46 per share
December 31, 2008     51 per share
The options were granted as compensation for executives' services to be rendered over a two-year period beginning January 1, 2007. The Black-Scholes option pricing model determines total compensation expense to be $500,000. What amount of compensation expense should Tanner recognize as a result of this plan for the year ended December 31, 2007 under the fair value method?
a.     $250,000.
b.     $500,000.
c.     $550,000.
d.     $1,750,000.

     66.     Kiner, Inc. had 40,000 shares of treasury stock ($10 par value) at December 31, 2006, which it acquired at $11 per share. On June 4, 2007, Kiner issued 20,000 treasury shares to employees who exercised options under Kiner's employee stock option plan. The market value per share was $13 at December 31, 2006, $15 at June 4, 2007, and $18 at December 31, 2007. The stock options had been granted for $12 per share. The cost method is used. What is the balance of the treasury stock on Kiner's balance sheet at December 31, 2007?
a.     $140,000.
b.     $180,000.
c.     $220,000.
d.     $240,000.


Use the following information for questions 67 through 69.

On January 1, 2006, Merken, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 60,000 SARs. Current market prices of the stock are as follows:
January 1, 2006     $35 per share
December 31, 2006     38 per share
December 31, 2007     30 per share
December 31, 2008     33 per share

Compensation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2006.

     *67.     What amount of compensation expense should Merken recognize for the year ended December 31, 2006?
a.     $180,000
b.     $270,000
c.     $225,000
d.     $1,080,000

     *68.     What amount of compensation expense should Merken recognize for the year ended December 31, 2007?
a.     $0
b.     $30,000
c.     $300,000
d.     $150,000

     *69.     On December 31, 2008, 16,000 SARs are exercised by executives. What amount of compensation expense should Merken recognize for the year ended December 31, 2008?
a.     $285,000
b.     $195,000
c.     $585,000
d.     $78,000

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