Question

Wall Drugs offered an incentive stock option plan to its employees. On January 1, 2021, options were granted for 62,500 $1 par common shares. The exercise price equals the $3 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 70% the options on April 15, 2024, when the market price of the stock was $6

Answer 1

Step-by-step explanation:

Base on the scenario been described in the question, we can use the following method

Account Debit Credit

Compensation expenses 20,833

Paid in capital - Stock options 20,833

(62,500*1)/3