The employees of Tenor Corporation exercise 10,000 stock options in 2021. Each option has an exercise price of $40, so Tenor Corporation receives $400,000 cash from employees. Each exercised option entitles the employee to receive one share of the company's $0.10 par value common stock. What journal entry does Tenor make to record the stock option exercises? Dr. Cash 400,000 Cr. Common Stock 400,000 Dr. Stock Compensation Expense 400,000 Cr. Common Stock 1,000 Cr. APIC 399,000
The employees of Tenor Corporation exercise 10,000 stock options in 2021. Each option has an exercise price of $40, so Tenor Corporation receives $400,000 cash from employees. Each exercised option entitles the employee to receive one share of the company's $0.10 par value common stock. What journal entry does Tenor make to record the stock option exercises? Dr. Cash 400,000 Cr. Common Stock 400,000 Dr. Stock Compensation Expense 400,000 Cr. Common Stock 1,000 Cr. APIC 399,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The employees of Tenor Corporation exercise 10,000 stock options in 2021. Each
option has an exercise price of $40, so Tenor Corporation receives $400,000 cash
from employees. Each exercised option entitles the employee to receive one share
of the company's $0.10 par value common stock. What journal entry does Tenor
make to record the stock option exercises?
Dr. Cash
400,000
Cr. Common Stock
400,000
Dr. Stock Compensation Expense
400,000
Cr. Common Stock
1,000
Cr. APIC
399,000
Expert Solution
Step 1
Common stock: These are the shares issued by a company to an outsider. These shares entitle a share of ownership to the person acquired them. The holders of these shares will have voting powers and can elect the board of directors. In the event of liquidation, the holders of these shares will get a right on corporation's assets only after the preferred debts were paid off.
Stock options: It is the right of an investor to purchase or sell a stock at a price and date which is agreed upon.
Additional paid in capital: It is the amount received in excess of par value of shares issued.
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