Pangea Muffin Company Inc. offers its top executives the opportunity to purchase its $1 par

value common stock at a 20% discount to the market price. The employees have 3 weeks to

elect to participate in the plan. The current market price of the stock is $40 per share.

Employees purchased a total of 500 shares. The company issued new shares to satisfy the

employees' purchases.

What journal entry will the company make on the date the employees purchase the shares?

Cr. Additional paid-in capital --$19,500

Dr. Cash --$16.000

Dr. Compensation expense --$4,000

Cr. Additional paid-in capital --$15,500

Dr. Cash --$20,000

Cr. Common stock at par --zero

Cr. Common stock at par --$500