Question

Definition

Match the term with the appropriate stock option related definition.

Term Definition

Exercise price: _______ A. Period over which employees perform service—time between the grant date and the vesting date

Exercise period: _______ B. Value determined using an option pricing model

Service period: _______ C. Options where current stock price > exercise price

Fair value amount: _______ D. Options where current stock price < exercise price

Under water options: _______ E. Period employees may exercise their options—time between the vesting date and the expiration date

In the money options: _______ F. Predetermined price to purchase stock at a future date—also known as the strike price

Scenario:

On December 31, 2015, a Company reports the following amounts: Loss from Discontinued Operations, Net of Tax=$90,000; Net Income=$510,000; Weighted Average Number of Shares Outstanding=150,000 shares. Based on this information, complete the following table reporting per share amounts for Income from Continuing Operations, Loss from Discontinued Operations, Net of Tax, and Net Income.

Earnings Per Share	Per Share Amount
Income from Continuing Operations
Loss from Discontinued Operations, Net of T
Net Income

Answer 1

Exercise price	F	Predetermined price to purchase stock at a future date—also known as the strike price
Exercise period	E	Period employees may exercise their options—time between the vesting date and the expiration date
Service period:	A	Period over which employees perform service—time between the grant date and the vesting date
Fair value amount	B	Value determined using an option pricing model
Underwater options	D	Options where current stock price < exercise price
In the money options	C	Options where current stock price > exercise price

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Earnings Per Share:	Amount (A)	Weighted Average Number of Shares Outstanding (B)	Per Share Amount (A) ÷ (B)
Income from Continuing Operations       [$510,000 + $90,000]	$600,000	150,000	$4.00
Loss from Discontinued Operations, Net of Tax	-$90,000	150,000	$0.60
Net Income	$510,000	150,000	$3.40