On March 1, 2017, when the market price of Wilson's stock was $14 per share, 3 million of the options were exercised. The journal entry to record this would include:
A)A debit to paid-in capital-stock options for $42 million.
B)A credit to paid-in capital-excess of par for $255 million.
C)A credit to common stock for $75 million.
D)All of these are correct.

Question

Quizplus · Accepted Answer

When the options are exercised, the company receives cash equal to the exercise price multiplied by the number of options exercised. In this case, the exercise price is $10 per share, so the company would receive $30 million ($10 x 3 million). Since the options were issued with a fair value of $3 per option, the company would also credit additional paid-in capital for $9 million ($3 x 3 million). The total credit to paid-in capital would be $255 million ($9 million + $246 million). There would be no impact on common stock.

On March 1, 2017, When the Market Price of Wilson's