Question

1. NewCo grants 10,000 options to its CFO, with a grant date of January 15, 2018.  The options grant the CFO the right to purchase shares (one-for-one) of company stock at a price of $.50 per share.  
   1. When NewCo grants the options, what will change on its balance sheet?

2. When the CFO exercises the options
   1. where will the 10,000 shares come from? (Who is selling the shares to the CFO?)

2. What will change on NewCo’s balance sheet?

Answer 1

A. When the company is granting the option it will mean that it will reduce the owners equity and it will increase the overall float in the market and it would be increasing the paid up capital of the company when these stock options are getting exercised in the market.

Or it can even reduce the owners equity in the balance sheet and adjust with the correspondence decrease in the cash on the Asset side

B. I. The shares will be coming from the owners equity and all those shares which are held by the promoters and companies shares which has not been floated into the market.

II. It would be leading to decrease in the owner's equity and increasing the paid up share capital or it can also be simultaneously adjusted with the cash on the assets side by decreasing the overall cash.