[JBach85]

So I’ve been studying for hours now with very little sleep, so my brain might not be working properly, but I can’t figure out how the Wiley book comes up with the $52,000 number in the below problem. Shouldn’t it be $520,000?

“Suppose ABC Corporation establishes an employee stock option plan on January 1, year 1. The plan allows it’s employees to acquire 10,000 shares of its $1 par value common stock at $52 per share, when the market price is also $52. The options may not be exercised until five years from the grant date. The grant-date fair value of an option with similar terms and conditions is $8.62.”

The book then provides the JE made once the options are exercised after 5 years.

dr. Cash $52,000

dr. Stock options outstanding $86,200

cr. Common Stock. $10,000

cr. Add’l Paid in Capital $128,200

I get the $86,200 debit and the 10,000 credit, but shouldn’t there be a debit of $520,000 to cash (52 x 10,000) and a credit of 596,200 (plug) to APIC? So confused….

FAR - 93
AUD - 96
REG - 83
BEC - 86

[EuroAddict]

Yep. 10,000 shares at $52 should be $520,000 cash.

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[JBach85]

Ok, that's what I thought. Thank you! It's so frustrating when the study materials are incorrect. I waste so much time second guessing myself thinking that I must be doing something wrong. The silver lining is that I've now spent so much time on stock options that I can cross that topic off my list haha.

FAR - 93
AUD - 96
REG - 83
BEC - 86

[Author]

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