Now assume the options were sold to investors and priced at 50c each. The terms are that 1000 000 options are issued on 30th June 2022 that allow the investor to purchase, up to 30th Dec 2022, a share for $3 each. By 30/12/22 900 000 option holders exercise the option and the rest lapse.

30/6/22 Dr Cash 500 000

Cr Options 500 000

(issue of 1000 000 50c options)

30/12/22 Dr Cash 2700 000 (900 000 X 3)

Dr Options 450 000 (900 000 x 50c)

Cr Share Capital 3150 000

(issue of 900 000 shares)

30/12/22 Dr Options 50 000 (50 000 x 50c)

Cr Lapsed Options Reserve 50 000

(transfer of lapsed options to reserve)