The treatment of employee stock option by a company and journal entries at the date of grant. Giveninformation: Number of shares offered is 1,000 shares. Fair value is $12. Market price and exercise price both is $6.

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Chapter 19, Problem 19.2BE

To determine

The treatment of employee stock option by a company and journal entries at the date of grant.

Giveninformation:

Number of shares offered is 1,000 shares.

Fair value is $12.

Market price and exercise price both is $6.

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On January 1, Year 1, Lasagna Corporation granted to an employee the right to choose either shares or cash payment. The choices are as follows: •Share alternative – equal to 25,000 shares with par value of P30 •Cash alternative – cash payment equal to the market value of 20,000 shares The grant is conditional upon the completion of three years of service. On grant date, on January 1, Year 1, the share price is P51. The share prices for the three-year vesting period are P54 on December 31, Year 1, P66 on December 31, Year 2 and P65 on December 31, Year 3. After taking into account the effect of vesting restrictions, the entity has estimated that the fair value of the share alternative is P48. What is the share premium if the employee has chosen the cash alternative on December 31, Year 3? A. 730,000 B. 0 C. 700,000 D. 180,000