Pastore Inc. granted options for 1 million shares of its $1 par common stock at
ID: 2427798 • Letter: P
Question
Pastore Inc. granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $39 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $6.50 per option.
A credit of $3.9 million.
A debit of $3.9 million.
A debit of $10.8 million.
A credit of $10.8 million.
Pastore Inc. granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $39 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $6.50 per option.
Explanation / Answer
Credit of $3.9 million.
= (6.50/5)1,000,000 = 1,300,000 per year
for 3 year = 1,300,000*3 = 3,900,000