Question

Pastore Inc. granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $35 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $8 per option. If the options have a vesting period of five years, what would be the balance in "Paid-in Capital—Stock Options" three years after the grant date?

Answer 1

$4,800,000 credit

Step-by-step explanation:

Total Paid-in Capital after five years = 1,000,0000 * $8 = $8,000,0000

Paid-in Capital after 3 years = $8,000,0000 * (3 / 5) = $4,800,000

Therefore, the balance in "Paid-in Capital—Stock Options" three years after the grant date would be $4,800,000 credit.