“On December 31, Year 17, Vaughn Manufacturing granted some of its executives options to purcha

“On December 31, Year 17, Vaughn Manufacturing granted some of its executives options to purcha

“On December 31, Year 17, Vaughn Manufacturing granted some of its executives options to purchase 173000 shares of the company s $10 par common stock at an option price of $50 per share. The Black-Scholes option pricing model determines total compensation expense to be $1346100. The options become exercisable on January 1, Year 18, and represent compensation for executives services over a three-year period beginning January 1, Year 18. At December 31, Year 18 none of the executives had exercised their options. What is the impact on Vaughn s net income for the year ended December 31, Year 18 as a result of this transaction under the fair value method?”

$ 448700 decrease.

$ 448700 increase.

$1346100 decrease.

$0.00

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