Wilson Inc. developed a business strategy that uses stock options as a major compensation incentive for...

Wilson Inc. developed a business strategy that uses stock options as a major compensation incentive for its top executives. On January 1, 2021, 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, 2025. They cannot be exercised before that date and will expire on December 31, 2027. The fair value of the 20 million options, estimated by an appropriate option pricing model, is $40 per option. Ignore income tax. Wilson's compensation expense in 2021 for these stock options was: A. $0. B. $200 million. C. $400 million. D. $800 million

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	Journal Entries
Date	Particulars	Debit	Credit
2021	Employees compensation expense account	$ 200
	Employee stock option outstanding account		$ 200
	(To record compensation expenses )
	(20*40)/5= 200 million
2021	Profit and loss account	$ 200
	Employees compensation expenses account		$ 200
	(To record expenses transferred profit and loss account at the year end)

ekkarill92 answered 1 year ago

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