Wall Drugs Offered an Incentive Stock Option Plan to Its

Multiple Choice

Wall Drugs offered an incentive stock option plan to its employees. On January 1, 2018, options were granted for 60,000 $1 par common shares. The exercise price equals the $5 market price of the common stock on the grant date. The options cannot be exercised before January 1, 2021, and expire December 31, 2022.
-Each option has a fair value of $1 based on an option pricing model. Which is the correct entry to record the exercise of 90% the options on April 15, 2021, when the market price of the stock was $8?

A) $\begin{array}{|l|r|r|}\hline \text { Cash } & 270,000 & \\\hline \text { Paid-in capital -stock options } & 54,000 & \\\hline \text { Common stock } & & 60,000 \\\hline \text { Paid-in capital excess of par } & & 264,000 \\\hline\end{array}$
B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 378,000 & \\\hline \text { Paid-in capital -stock options } & 54,000 & \\\hline \text { Common stock } & & 54,000 \\\hline \text { Paid-in capital\_excess of par } & & 378,000 \\\hline\end{array}$
C) $\begin{array}{|l|r|r|}\hline \text { Cash } & 270,000 & \\\hline \text { Paid-in capital—stock options } & 54,000 & \\\hline \text { Compensation expense } & 108,000 & \\\hline \text { Common stock } & & 54,000 \\\hline \text { Paid-in capital\_excess of par } & & 378,000 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Cash } & 270,000 & \\\hline \text { Paid-in capital -stock options } & 54,000 & \\\hline \text { Common stock } & & 54,000 \\\hline \text { Paid-in capital excess of par } & & 270,000 \\\hline\end{array}$