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Analyzing Stock-Based Compensation Hearne Inc. began business on March 1,2020. At that time,...

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Accounting

Analyzing Stock-Based Compensation
Hearne Inc. began business on March 1,2020. At that time, it granted 250,000 options, with a strike
price of $5, to computer engineers in lieu of signing bonuses. The fair value of each option was esti-
mated at $1 and the options vest over four years.
a. What benefits did Hearne create by granting options to the engineers instead of cash signing
bonuses?
b. What is the total expense that the company will record associated with the options granted in 2020?
c. What will Hearne record in 2020 for stock-option compensation expense?
d. How will the exercise of the options impact the balance sheet, income statement, and statement of
cash flows?

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