Viceroy Industries offers stock options to employees as part of its overall compensation plan. The employee stock options fully vest in two years.

a. On January 1, Year 3, Viceroy granted 320,000 options to employees. The exercise price of those options was $64.00 per option. The weighted average fair value of the options granted was $24.00 per option. Net income for Viceroy for Year 3 was $76.8 million.

Use the financial statements effects template to report the effects in Year 4 of the employee stock options granted on January 1, Year 3.

Use negative signs with your answers, when appropriate. Select "N/A" as your answer if a part of the equation is not affected.

	Balance Sheet				Income Statement
	Cash		Noncash				Contributed		Contra		Earned								Net
Transaction	Asset	+	Assets	=	Liabilities	+	Capital	-	Equity	+	Capital				Revenue	-	Expenses	=	Income
Stock options	Answer						Answer		Answer		Answer						Answer		Answer
	AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A						AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A		AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A		AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A						AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A

b. During Year 5, Viceroy employees exercised 256,000 of the options granted in Year 1, paying a total of $16,384,000 in cash to the company. The shares were issued from treasury shares previously purchased at $64 per share.

Use the financial statements effects template to report the effects of the employee exercise of stock options in Year 5.

Use negative signs with your answers, when appropriate. Select "N/A" as your answer if a part of the equation is not affected.

	Balance Sheet				Income Statement
	Cash		Noncash				Contributed		Contra		Earned								Net
Transaction	Asset	+	Assets	=	Liabilities	+	Capital	-	Equity	+	Capital				Revenue	-	Expenses	=	Income
Stock options exercised	Answer						Answer		Answer		Answer						Answer		Answer
	AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A						AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A		AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A		AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A						AnswerAdditional paid-in capitalCashCommon stockCompensation expenseDividends payablePreferred stockRetained earningsTreasury stockN/A