On January 1,2020 , Red Day Company granted 80 share options to each of its 400 employees for the purchase of P 100 par ordinary share at P 140 per share. The fair value of each option on this date was P 22. The employees are required to be in the employ of the company at least until the options vested. The share options will vest as follows: End of 2020, if earnings in 2020 increased of 15% End of 2021, if average annual earnings during 2020 would increase by at least 13%. During 2021, reported earnings increased by 12%. The company reported an increase in 2020 earnings by 13%. At December 31,2020, it was expected that earnings during 2020 would increase by at least 13%. During 2021, reported earnings increased by 12%. No employees left the company during the two year period 2020-2021. All options were exercised during 2022. REQUIRED: a.) All entries during 2020 through 2022. b.) Assume that the reported earnings in 2020 increased by 15%. How much compensation expense would be recognized during 2020 as a result of the option plan?
On January 1,2020 , Red Day Company granted 80 share options to each of its 400 employees for the purchase of P 100 par ordinary share at P 140 per share. The fair value of each option on this date was P 22. The employees are required to be in the employ of the company at least until the options vested. The share options will vest as follows:
End of 2020, if earnings in 2020 increased of 15%
End of 2021, if average annual earnings during 2020 would increase by at least 13%. During 2021, reported earnings increased by 12%.
The company reported an increase in 2020 earnings by 13%. At December 31,2020, it was expected that earnings during 2020 would increase by at least 13%. During 2021, reported earnings increased by 12%.
No employees left the company during the two year period 2020-2021. All options were exercised during 2022.
REQUIRED:
a.) All entries during 2020 through 2022.
b.) Assume that the reported earnings in 2020 increased by 15%. How much compensation expense would be recognized during 2020 as a result of the option plan?
Step by step
Solved in 3 steps
