In order to encourage employee ownership of the company’s $1 par common shares, Washington Distribution permits any of its emplo
yees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can be purchased at a 8% discount. During March, employees purchased 65,000 shares at a time when the market price of the shares on the New York Stock Exchange was $28 per share.Required:Prepare the appropriate journal entry to record the March purchases of shares under the employee share purchase plan. (If no entry is required for an event, select "No journal entry required" in the first account field.)
1 answer:
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Answer:
$119.56
Explanation:
We will use compound interest formula to solve this problem.
The formula is:
Where
F is the future value
P is the present amount
r is the rate of interest per period
t is the number of periods
Here,
F is the value we want, after 3 years
P is the present amount, $100
r is the rate of interest per quarter (per period)
Given r = 6% annually, so that would make:
6%/4 = 1.5% per quarter, or 1.5/100 = 0.015
Also, t is the number of quarters in 3 years, that would be 4*3 = 12
Now, substituting, we get our answer:
The first answer choice is right, $119.56