1. Wise Inc. developed a business strategy that uses stock options as a major compensation incentive for its top executives. On January 1, 2021, 20 million options were granted, each giving the executive owning them the right to acquire five $1 par common shares. The exercise price is the market price on the grant date$10 per share. Options vest on January 1, 2025. They cannot be exercised before that date and will expire on December 31, 2027. The fair value of the 20 million options, estimated by an appropriate option pricing model, is $40 per option. Ignore income tax.

Assume that all compensation expense from the stock options granted by Wise already has been recorded. Further assume that 200,000 options expire in 2026 without being exercised. The journal entry to record this would include:

A) Debit to paid-in capitalstock options for $8 million.

B) A debit to common stock for $5 million.

C) A debit to paid-in capitalexpiration of stock options for $8 million.

D) None of these answer choices are correct.

2. Pro Footballs acquired a patent in 2018 at a cost of $150 million and amortizes the patent on a straight-line basis. During 2021 management decided that the benefits from the patent would be received over a total period of 8 years rather than the 20-year legal life being used to amortize the cost. Pro's 2021 financial statements should include:

A) A patent balance of $150 million.

B) A patent balance of $110 million.

C) Patent amortization expense of $15 million.

D) Patent amortization expense of $25.5 million.