Under its executive stock option plan, National Corporation granted options on J
ID: 2596754 • Letter: U
Question
Under its executive stock option plan, National Corporation granted options on January 1, 2016, that permit executives to purchase 15 million of the company’s $1 par common shares within the next eight years, but not before December 31, 2018 (the vesting date). The exercise price is the market price of the shares on the date of grant, $32 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Suppose that the options are exercised on April 3, 2019, when the market price is $36 per share.
Ignoring taxes, what journal entry will National record?
Record entry for options exercised on April 3, 2019, when the market price is $36 per share.
Under its executive stock option plan, National Corporation granted options on January 1, 2016, that permit executives to purchase 15 million of the company’s $1 par common shares within the next eight years, but not before December 31, 2018 (the vesting date). The exercise price is the market price of the shares on the date of grant, $32 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Suppose that the options are exercised on April 3, 2019, when the market price is $36 per share.
Explanation / Answer
Solution:-
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Date Account titles and explanation Debit Credit April 1, 2019 Cash (15,000,000 * 32) 480,000,000 Paid in capital - stock option (15,000,000 * 4) 60,000,000 Common stock 15,000,000 Paid in capital - excess of par 525,000,000Related Questions
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