Under its executive stock option plan, Western Corporation granted options on January1, 2021, that permit executives to purchase 26 milon of the company's $1 par common shares within the next eight years, but not before December 31 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $20 per share. The fair value of the options, estimated by an appropriate option pricing model, is $6 per option. No forfeitures are anticipated. The options are exercised on April 2, 2024, when the market price is $23 per share. By what amount will Western's shareholder's equity be increased when the options are exercised?

Under its executive stock option plan, Western Corporation granted options on January1, 2021, that permit executives to purchase 26 milon of the company's $1 par common shares within the next eight years, but not before December 31 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $20 per share. The fair value of the options, estimated by an appropriate option pricing model, is $6 per option. No forfeitures are anticipated. The options are exercised on April 2, 2024, when the market price is $23 per share. By what amount will Western's shareholder's equity be increased when the options are exercised?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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