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What is the net effect in the shareholder equity as a result

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Reference no: EM132769031

On February 1, 2019, SC Company enters into a contract with San Miguel Corp. that gives SC Company the right to sell, and San Miguel Corp. the obligation to buy the fair value of 2,000 shares of SC Company's own ordinary share outstanding as of January 31, 2020 at a strike price of P196,000 (P98 per share) on January 31, 2020, if SC Company exercises the right. The contract will be settled net in cash, however, if SC Company does exercise the right, no payment will be made.

Below is pertinent relevant information:

                                    2/1/2019             12/31/2019              1/31/2020

Market price per share        P100/share            P95/share               P95/share

Fair value of options             P10,000                 P8,000                   P6,000

Problem 1: What is the net effect in the shareholder's equity as a result of the exercise of the option?

Group of answer choices

a. None

b. P4,000

c. P8,000

d. P6,000

Reference no: EM132769031

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