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Topic
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On January 1, Year 1, Ward Corp. granted stock options to corporate executives for the purchase of 20,000 shares of the company’s $20 par value common stock at $48 per share. All stock options were exercised on December 28, Year 1. Using an acceptable option pricing model, Ward calculated total compensation cost of $240,000. The quoted market prices of Ward’s $20 par value common stock were as follows:
January 1, Year 1
$45
December 28, Year 1
60
As a result of the grant and exercise of the stock options and the issuance of the common stock, Ward’s additional paid-in capital increased by:
a. $560,000
b. $500,000
c. $800,000
d. $740,000
Explanation
Choice “c” is correct. $800,000 increase to additional paid-in capital.
My question:
The journal entries are as follows”
Compensation Expense 240,000
APIC- stock options 240,000
Cash 960,000
PIC-Stock options 240,000
Common Stock 400,000
PIC 800,000
My question is why the hell is PIC increased by 800,000 and not the net of (800,000-240,000 = 560,000)!!
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