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
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Chapter1: Financial Statements And Business Decisions
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Under its executive stock option plan, Western Corporation granted options on January 1, 2021, that permit executives to purchase 26 million 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?
Transcribed Image Text:Under its executive stock option plan, Western Corporation granted options on January 1, 2021, that permit executives to purchase 26 million 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?
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