Under its executive stock option plan,Z Corporation granted options on January 1,2016,that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years,but not before December 31,2018 (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 $4 per option.No forfeitures are anticipated.The options expired in 2022 without being exercised.By what amount will Z's shareholder's equity be increased?
A)$ 60 million
B)$270 million.
C)$315 million.
D)$330 million.

Question

Quizplus · Accepted Answer

Since the options were not exercised, there is no impact on the company's financial statements until they expire. Therefore, the fair value of the options ($4 per option) multiplied by the number of options granted (15 million) equals $60 million. This amount represents an increase to the company's additional paid-in capital, which is a component of shareholders' equity.

Under Its Executive Stock Option Plan,Z Corporation Granted Options on January