in the tax jurisdiction of mack a public limited company a tax deduction is allowed 562618

A. In the tax jurisdiction of Mack, a public limited company, a tax deduction is allowed for the intrinsic value of the share options issued to employees. The company issued options on January 1, 20X4, worth $15 million to employees. They vest in three years. The share options’ intrinsic value at December 31, 20X4, was $12 million. The tax rate in the jurisdiction is 30%. What is the tax effect of the above issue of share options at December 31, 20X4?

(a) $1.5 million benefit to income statement.

(b) $1.2 million benefit to income statement.

(c) $1.5 million benefit recognized in equity.

(d) $1.2 million benefit recognized in equity.

B. In the above example, what would be the tax effect if the intrinsic value at December 31, 20X4, was $21 million?

(a) $2.1 million tax benefit to income.

(b) $2.1 million recognized in equity.

(c) $1.5 million tax benefit to income, $0.6 million recognized in equity.

(d) $1.5 million recognized in equity, $0.6 million tax benefit to income.

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