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What happens when sachs exercises his stock options

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Reference no: EM132765675

Question - Kevin Company grants stock options to Sachs to purchase 2,500 shares of Kevin Co. $1 par value common stock at a price of $34 per share. At the time of grant, the value of the options, based on an accepted option pricing model is $11.50 per option. On May 1, 2020, Sachs exercises 850 options when the FMV of the shares is $41 per share.

Required -

a. Describe in words, from Kevin Company's point of view, exactly what happens when Sachs exercises his stock options. Be specific.

b. Based on your description above, give the journal entry for the exercise of the options. Show all work for full credit.

Reference no: EM132765675

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