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16. A company provides a stock option to its treasurer that permits her to purchase, at todays market price, 1,000 shares of
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Answer #1

In the given question, the stock options were given to the employee. As the employee can exercise them at any time, vesting period is nil. The company should record an adjusting entry. The stock option compensation cost is calculated by multiplying number of shares with fair value of option.
The entry is recorded by debiting stock option compensation expense account, and crediting Stock Options account, which appears a liability.
When the employee exercises the option, the Cash account is debited, stock options account is debited and common stock account is credited.

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