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What the exercise of the options will result in a credit

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Reference no: EM132740131

You were able to gather the following information in connection with your audit of Milan Corporation:

  1. On January 1, 2008, Milan Company granted share options to officers and key employees for the purchase of 30,000, P10 par value, ordinary shares of the company at P25 per share. The options are exercisable within a 5-year period beginning January 1, 2010 by grantees still in the employ of the company, and expiring December 31, 2014. The service period for this award is 2 years. The fair value option pricing model determined total compensation expense to be P525,000. The share was selling at P35 at the time the options were granted.
  2. On April 1, 2008, 3,000 options were terminated when the employees resigned from the company. The market value of ordinary share was P35 per share on this date.
  3. On March 31, 2010, 18,000 option shares were exercised when the market value of ordinary share was P40 per share.

Problem 1: The exercise of the 18,000 options will result in a credit to Share premium - excess over par of

Option 1: P270,000
Option 2: P585,000
Option 3: P450,000
Option 4: P620,000

Reference no: EM132740131

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