Under Its Executive Stock Option Plan, W Corporation Granted Options

Multiple Choice

Under its executive stock option plan, W Corporation granted options on January 1, 2009, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2011 (the vesting date) . The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. The options are exercised on April 2, 2012, when the market price is $21 per share. By what amount will W's shareholder's equity be increased?

A) $ 60 million
B) $270 million
C) $315 million
D) $330 million The $60 million total compensation is expensed equally over the three-year vesting period, increasing the balance in the Paid-in capital-stock options account.$315 + 15 60 = $270 Note: The market price at exercise is irrelevant.