egy major compensation incentive for its top executives. • On January 1, 2018, 20 million options were granted, eacl the executive owning them the right to acquire six $1 par common shares. The exercise price is the market price on the grant date- share. • Options vest on January 1, 2022. They cannot be exercise before that date and will expire on December 31, 2024. • The fair value of the 20 million options, estimated by an appropriate option pricing model, is $40 per option. Ignor income tax. on March 1, 2022, when the market price of Wilson's stock v er share, 3 million of the options were exercised. he journal entry to record this would include: O A debit to paid-in capital-stock options for $120 million All of these answer choices are correct O A credit to common stock for $75 million

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Wilson Inc. developed a business strategy that uses stock options as
a major compensation incentive for its top executives.
• On January 1, 2018, 20 million options were granted, each giving
the executive owning them the right to acquire six $1 par
common shares.
• The exercise price is the market price on the grant date-$10 per
share.
• Options vest on January 1, 2022. They cannot be exercised
before that date and will expire on December 31, 2024.
• The fair value of the 20 million options, estimated by an
appropriate option pricing model, is $40 per option. Ignore
income tax.
On March 1, 2022, when the market price of Wilson's stock was $14
per share, 3 million of the options were exercised.
The journal entry to record this would include:
A debit to paid-in capital-stock options for $120 million
All of these answer choices are correct
A credit to common stock for $75 million
A credit to paid-in capital-excess of par for $255 million
Transcribed Image Text:Wilson Inc. developed a business strategy that uses stock options as a major compensation incentive for its top executives. • On January 1, 2018, 20 million options were granted, each giving the executive owning them the right to acquire six $1 par common shares. • The exercise price is the market price on the grant date-$10 per share. • Options vest on January 1, 2022. They cannot be exercised before that date and will expire on December 31, 2024. • The fair value of the 20 million options, estimated by an appropriate option pricing model, is $40 per option. Ignore income tax. On March 1, 2022, when the market price of Wilson's stock was $14 per share, 3 million of the options were exercised. The journal entry to record this would include: A debit to paid-in capital-stock options for $120 million All of these answer choices are correct A credit to common stock for $75 million A credit to paid-in capital-excess of par for $255 million
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