Question

Drugs offers an incentive stock option plan to its employees. On January 1, 2021, options were...

Drugs offers an incentive stock option plan to its employees. On January 1, 2021, options were granted for 80,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The options cannot be exercised before January 1, 2024, and expire December 31, 2025. Each option has a fair value of $1 based on an option pricing model. Which is the correct entry to record the exercise of 96% of the options on April 15, 2024, when the market price of the stock was $9?

Homework Answers

Answer #1
Accounts Title and Explanation Debit (in $) Credit (in $)
Cash
($ 80,000 x 96 % x ($9 (-) $1 )
$614,400
Paid in capital - Stock options
($ 80,000 x 96 %)
$76,800
                Common stock $76,800
                Paid in capital - excess of par $614,400
(To record the exercise of Options)
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