On May 21,2015,Becker Corporation granted Howard an option to acquire 200 shares of the company's stock for $8 per share.The fair market price of the stock on the date of grant was $14.The option did not have a readily ascertainable fair market value.Howard exercises the option on July 7,2017,when the fair market value of the stock is $20.How much must she report as income at the date of exercise?
A)$-0-
B)$1,200
C)$2,400
D)$7,200
E)$10,800

Question

Quizplus · Accepted Answer

When Howard exercises the option, she must report the difference between the fair market value at the date of exercise ($20) and the option price ($8) as income.

$20 - $8 = $12 per share

Howard exercises the option for 200 shares, so her total income from exercising the option is:

$12 x 200 = $2,400

Therefore, the correct choice is C) $2,400.

On May 21,2015,Becker Corporation Granted Howard an Option to Acquire