Martin Corp. permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can be purchased at a 10% discount. During 2018, employees purchased 8 million shares; during this same period, the shares had a market price of $15 per share at the end of the year. Martin's 2018 pretax earnings will be reduced by:
A) $12 million.
B) $108 million.
C) $120 million.
D) $0.

Question

Quizplus · Accepted Answer

$\begin{array}{|l|r|l|}
\hline \text { Cash }(\$ 15 \times 8 \text { million } \times 90 \%) & 108 & \
\hline \text { Compensation expense }(\$ 15 \times 8 \text { million } \times 10 \%) & 12 & \
\hline \text { Common stock }(\$ 15 \times 8 \text { million }) & & 120 \
\hline
\end{array}$