Wilson Inc

question 205

Multiple Choice

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 five $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.
- Assume that all compensation expense from the stock options granted by Wilson already has been recorded. Further assume that 200,000 options expire in 2023 without being exercised. The journal entry to record this would include:

• A) Debit to paid-in capital-stock options for $8 million.
• B) A debit to common stock for $5 million.
• C) A debit to paid-in capital-expiration of stock options for $8 million.
• D) None of these answer choices is correct.

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