Schmidt Electronics Offered an Incentive Stock Plan to Its Employees $\begin{array}{llcc} \text { Deferred Compensation} &183,333\\ \text {APIC - Stock Options } &&183,333\\\end{array}$

Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 110,000 options were granted for 110,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $5 based upon an option pricing model. What is the journal entry to record compensation expense for Year 1? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.)

A)
$\begin{array}{llcc} \text { Deferred Compensation} &183,333\\ \text {APIC - Stock Options } &&183,333\\\end{array}$


B)
$\begin{array} { l l } \text { Compensation Expense } &183,333\\\text { Common Stock }&& 183,333 \\\end{array}$
C)
$\begin{array}{llcc} \text { Compensation Expense } &550,000 \\\text { APIC - Stock Options } &&550,000\\\end{array}$

D)
$\begin{array}{llcc} \text { Compensation Expense } &183,333\\ \text { APIC-Stock Options } &&183,333\\\end{array}$

Correct Answer:

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