1.) Semester Inc. has issued 2,500,000 options to its most senior managers as part of their compensation package (each option allows the purchase of 1 share of $1 par common stock so 2,500,000 shares could be acquired with these options). The strike price is $20, the options vest in 5 years, and expire 5 years after that (so, expiration is 10 years after granting). The options have a fair value of $ 3 each. The options are granted in 2017. Assume that half of the options are exercised in 2025. At the expiration date there are 250,000 options that were never exercised. What is the effect of these expired options on compensation expense?

A. Credit $ 750,000

B. Debit $ 750,000

C. Credit $ 5,000,000

D. Debit $ 5,000,000

E. No effect on compensation expense

2.) Semester Inc. has issued 2,500,000 options to its most senior managers as part of their compensation package (each option allows the purchase of 1 share of $1 par common stock so 2,500,000 shares could be acquired with these options). The strike price is $20, the options vest in 5 years, and expire 5 years after that (so, expiration is 10 years after granting). The options have a fair value of $ 3 each. The options are granted in 2017. Assume that half of the options are exercised in 2025. Which of the following would be part of the journal entry to record this event?

A.) Credit Cash $ 25,000,000

B.) Debit Paid-in-capital: expired options $ 3,750,000

C.) Credit Retained earnings $ 27,500,000

D.) Credit Paid-in-capital: excess of par $ 27,500,000

E.) Debit Treasury stock $ 25,000,000

3.)Semester Inc. has issued 2,500,000 options to its most senior managers as part of their compensation package (each option allows the purchase of 1 share of $1 par common stock so 2,500,000 shares could be acquired with these options). The strike price is $20, the options vest in 5 years, and expire 5 years after that (so, expiration is 10 years after granting). The options have a fair value of $ 3 each. The options are granted in 2017. How much, if any, compensation expense will Semester Inc. record related to these options in 2019?

A. $ 750,000

B. $ 1,500,000

C. $ 10,000,000

D. $ 5,000,000

E. $ 0

4.) Acme issued 100,000 shares of $2 par common stock in its initial public offering. The IPO price was $22/share. There were no other common share transactions until Acme repurchased 10,000 shares and retired them. The repurchase price was $19/share. Six months after the repurchase and retirement, Acme sells 5,000 shares for $20/share. Which of the following accounts will NOT be used in the journal entry for the sale?

A. Paid-in-capital: share repurchase

B. Common stock

C. Retained earnings

D. Cash

E. None of the above (means all of those accounts will be part of the journal entry)

5.) Acme issued 100,000 shares of $2 par common stock in its initial public offering. The IPO price was $22/share. There were no other common share transactions until Acme repurchased 10,000 shares and retired them. The repurchase price was $19/share. In addition to crediting cash $190,000 another account will be credited for $30,000. Which account is this?

A.Treasury stock

B. Common Stock

C. Retained Earnings

D. Paid-in-capital: excess of par

E. Paid-in-capital: share repurchase