On January 1, Year 1, Axis Corporation Granted Employees 63,000

question 121

Multiple Choice

On January 1, Year 1, Axis Corporation granted employees 63,000 stock options for 63,000 shares of $3 par value common stock. The exercise price on the date of issue was equal to the market price of $24. There is a two-year vesting period and the options expire in four years. Employees have the right to sell back the shares to the corporation within six months of exercise. At the time of issue, the fair value of the options is estimated to be $31 per option. Two years later, the options are exercised. What is the appropriate journal entry?

• A) \(\begin{array}{|l|c|c|}
• \hline \text { Cash } & 1,512,000 & \\
• \hline \text { Liability for Stock-based Compensation } & 1,953,000 & \\
• \hline \text { Common Stock } & & 189,00 \\
• \hline \text { APIC in Excess of Par - Common } & & \\
• \hline
• \end{array}\)
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 1,512,000 & \\
• \hline \text { Common Stock } & & 189,000 \\
• \hline \text { APIC in Excess of Par - Common } & & 1,323,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 976,500 & \\
• \hline \text { Common Stock } & & 189,000 \\
• \hline \text { APIC in Excess of Par - Common } & & 787,500 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 189,000 & \\
• \hline \text { Liability for Stock-based Compensation } & 1,953,000 & \\
• \hline \text { Common Stock } & & 189,000 \\
• \hline \text { APIC in Excess of Par - Common } & & 1,953,000 \\
• \hline
• \end{array}\]

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Definitions:

Minimum-wage Laws

Legislation that sets the lowest hourly wage rate that can be paid to workers, intended to protect employees from unduly low pay.

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