Under its executive stock option plan, National Corporation granted 12 million o

Question

Under its executive stock option plan, National Corporation granted 12 million options on January 1, 2018, that permit executives to purchase 12 million of the company's $1 par common shares within the next six years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $17 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. Suppose that the options are exercised on April 3, 2021, when the market price is $19 per share. gnoring taxes, what journal entry will National record? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) View transaction list Journal entry worksheet Record entry for options exercised on April 3, 2021, when the market price is $19 per share. Note: Enter debits before credits Date General Journal Debit Credit April 03, 2021 Record entry Clear entry View general journal

Explanation / Answer

Journal Entries Date Account Title and explanation Debit (Amt in Million) Credit (Amt. in Million) April 03, 2021 Cash (12 million X $ 5) $                           60 Employee Compensation Expenses A/c (12 Million X $ 12) $                        144        To Common Share Capital (12 Million X $ 1) $                             12         To Addittional Paid in Capital - common stock $                           192 (To Record the option erercised for ESOP) Revenue Account $                        144 April 03, 2021      To Employee Compensation Expenses $                           144 (To Transfer the compensation in expeses)

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