What is the journal entry to record the exercise of 85% of the options during Year 4 when the market price of the stock was $10.

A)
Cash
408,000

APIC—Stock options
204,000

Common stock

68,000
APIC

544,000

B)
Cash
408,000

APIC—Stock options
204,000

Common stock

80,000
APIC

532,000

C)
Cash
204,000

APIC—Stock options
68,000

Common stock

68,000
APIC

204,000

D)
Cash
408,000

APIC—Stock options
68,000

Common Stock

80,000
APIC

396,000

Answer: A
Explanation: A) Cash 68,000 sh × $6 = $408,000; APIC—stock Options $240,000 × 85% = $204,000; Common Stock 80,000 shs × 85% × $1 = $68,000; APIC = $408,000 + $204,000 – $68,000 = $544,000