In the footnotes to the financial statements, Page reads that a portion of the company’s top managers’ compensation is options that are granted annually through a stock option plan. In the cash flow statement, Page notes that for the past several years, the company repurchased its shares as the options were exercised by its managers. At year end, 15,000 options with a strike price of $10.50 per share were exercised, and the price of the repurchased shares was $12.00 per share. Page is aware that the practice of repurchasing shares to compensate for the dilutive effects of stock option compensation can result in the company issuing financial statements that are in compliance with U.S. GAAP, but in reality may misrepresent the true economics of the transaction. Which of the following most accurately reflects the economics of the transaction? Operating Activities/ Financing Activities A) $0 / $22,500 outflow B) $0 / $180,000 inflow C) $22,500 outflow / $0
I just edited my post…I think this is an old LOS. But maybe it relates to SS 7 now…
Shouldn’t it be CFO up by 22.5 and CFF down by 22.5 to balance the cash flow. And there is no such choice - Did Schweser remove ‘D’ w/o reaffirming that it was the ans? Closest choice here would be - C?
C I missplaced the question number but I recall the answer saying that the $22,500 reflects compensation expense. Not sure why inflow is zero and that is why I posted this question.
is this an old los?
a) go to the east village b) find a place called yuca bar c) talk to the hostess. her name is bunky. she is really hot.