Answer to Question #180907 in Accounting for Milan Patel

Question

Debit Compensation Expense - Stock Option

Credit Additional Paid in Capital - Stock Option

• What does this journal entry mean?

Debit Additional Paid in Capital - Stock Option

Credit Additional Paid in Capital - Expired Stock Option

• What does this journal entry mean?

Answer 1

Accounting Treatment of Revaluation of Estimated Forfeitures - Accounting Treatment of Amortizable Expense

1) Рart (Amortizable Expense) of the option was written off

Debit Compensation Expense - Stock Option

Credit Additional Paid in Capital - Stock Option

The stock option compensation is an expense of the business and is represented by the debit to the expense account in the income statement. The other side of the entry is to the additional paid in capital account (APIC) which is part of the total equity of the business.

2) The remaining % of stock options expired at the end of the exercisable period

Debit Additional Paid in Capital - Stock Option

Credit Additional Paid in Capital - Expired Stock Option