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71. On December 31, 2024, Houser Company granted executives options to purchase 150,000 shares of the company's $50 par common stock at an option
71. On December 31, 2024, Houser Company granted executives options to purchase 150,000 shares of the company's $50 par common stock at an option price of $60 per share. The Black-Scholes option-pricing model determined total compensation expense to be $3,000,000. The options become exercisable on January 1, 2025 and represent compensation for executives' past and future services over a three-year period beginning January 1, 2025. What is the impact on Houser's total stockholders' equity for the year ended December 31, 2024, as a result of this transaction under the fair value method? a. $3,000,000 decrease b. $1,000,000 decrease c. $0 d. $1,000,000 increase Ans: C, LO: 3, Bloom: AN, Difficulty: Difficult, Min: 4, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement, Interpretation and Analysis, AICPA PC: None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None Solution: $3,000,000- $3,000,000 = $1,000,000 increase (from the credit to Paid-in Capital-Stock Options); offset by $1,000,000 decrease (debit to Compensation Expense).
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