Ram grants to employees the option to buy shares of stock at $5 per share. A total of 100,000 shares are in the option grant. The service period is 3 years. The option pricing model sets the value of each option at $5.40 on the grant date while the stock market price on the grant date is $6.00. At the end of the first year, how much compensation expense should be recorded? (Lesson 13.2) 4 O a. $200,000 Ob. $180,000 O c. $500,000 O d. $540,000

Ram grants to employees the option to buy shares of stock at $5 per share. A total of 100,000 shares are in the option grant. The service period is 3 years. The option pricing model sets the value of each option at $5.40 on the grant date while the stock market price on the grant date is $6.00. At the end of the first year, how much compensation expense should be recorded? (Lesson 13.2) 4 O a. $200,000 Ob. $180,000 O c. $500,000 O d. $540,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 7RE: On January 1, 2019, Phoenix Corporation adopts a performance-based share option plan for 25...

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On January 1, 2019, Phoenix Corporation adopts a performance-based share option plan for 25 executives, with the number of shares based on the yearly increase in sales. At the end of 2019, based on a 10% increase in sales, it expects that each executive will be granted 150 options and that the fair value of an option expected to vest is 15.75. Phoenix expects a turnover rate of 15% over the 3-year service period. Determine the compensation expense for 2019 for this plan.
On January 1, 2010, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood’s $5 par value common stock @ $50 per share at anytime during the next 5 years. The market price of the stock is $65 per share on the date of the grant. The period of benefit is 2 years. The Black – Scholes option pricing model determines total compensation expense to be $150,000. All options were excerised on December 31, 2012. Prepare Barwood’s journal entries for January 1, 2010, December 31, 2010, 2011, and 2012, using the fair value method.
Allied Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 100,000 options were granted for 100,000 $10 par common shares. The exercise price equals the $25 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 $15 based upon an option pricing model. At the end of the first year, it is expected that 100% of employees will exercise the options. By the end of Year 2, it is expected that only 80% of the options will be exercised. Allied chooses to adjust the fair value of options for the estimated forfeitures. What are the journal entries to reflect the first year and second years' compensation expense? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.)
Darius Inc. granted 200,000 stock options to its employees. The options expire 10 years after the grant date of January 1, 2021. The share price was $23 when the options were issued. Employees who are still with the company five years after the grant date may exercise the options to purchase shares at $45 per share. A consultant has estimated the value of each option on the grant date to be $2.50 per option. How much compensation expense should Darius Inc. record in 2021? Question 5 options: $460,000 $500,000 $880,000 $100,000
On January 1, 2020, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood's $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock is $65 per share on the date of grant. The fair value of the options at the grant date is $150,000. The period of benefit is 2 years. Prepare Barwood's journal entries for January 1, 2020, and December 31, 2020 and 2021.
On January 1, 2020, Barwood Corporation granted 5,000 options to executives. Each option entitles the holder to purchase one share of Barwood's $5 par value common stock at $50 per share at any time during the next 5 years. The market price of the stock is $65 per share on the date of grant. The fair value of the options at the grant date is $150,000. The period of benefit is 2 years. Prepare Barwood's journal entries for January 1, 2020, and December 31, 2020 and 2021. Repeat the requirements assuming that instead of options, Barwood granted 2,000 shares of restricted stock.
On January 1, 2016, sixty executives are offered a fixed compensatory stock option plan in which each of them will receive options to buy 6,000 shares of $10 par common stock at $40 a share. On the grant date, the fair value per option is $7.50. There is a three-year service period and an estimated annual employee turnover rate of 2%. Required: a. Compute the expected total compensation cost. b. Compute the compensation expense for 2016. c. Prepare the journal entry to record the exercise of options by six of the executives on January 1, 2019.
Please answer asap.Both a and b Earth Ltd grants 80 share options to each of its 200 employees. Each grant is conditional on the employee working for the company for 3 years following the grant date. On grant date, the fair value of each share option is estimated to be $12. Based on a weighted average probability, the company estimates that 20% of its employees will leave during the 3-year vesting period. During year 1, 15 employees left, and the company revises its estimate of total employee departures over the full 3-year period from 20% to 22%. During year 2, seven employees left, and the company revises its estimate of total employee departures over the full 3-year period from 22% to 15%. During year 3, a further four employees left. Required: a. Prepare a schedule setting out the annual and cumulative remuneration expense for years 1-3 b. Give the journal entry in year 1.
On January 1, 2020, ABC Company granted share options to each of the 300 employees working in the Accounting department. The options price is P90 and the par value is P70 per share.The share options vest at the end of a three-year period provided that the employees remain in the entity’s employ and provided the volume of sales will increase by 10% per year.The fair value of each share option on grant date is P35.The share will vest as follows: If the sales increase by 10%, each employee will receive 200 share options; If the sales increase by 15%, each employee will receive 300 share options.· On December 31, 2020, the sales increased by 10%, and no employees have left the entity· On December 31, 2021, sales increased by 15% and no employees have left.On December 31, 2022, the sales increased by 15% and 50 employees left the entityWhat is the share premium upon exercise of the share options on December 31, 2022?
On January 1, 2020, ABC Company granted share options to each of the 300 employees working in the Accounting department. The options price is P90 and the par value is P70 per share.The share options vest at the end of a three-year period provided that the employees remain in the entity’s employ and provided the volume of sales will increase by 10% per year. The fair value of each share option on grant date is P35. The share will vest as follows: If the sales increase by 10%, each employee will receive 200 share options; If the sales increase by 15%, each employee will receive 300 share options. · On December 31, 2020, the sales increased by 10%, and no employees have left the entity· On December 31, 2021, sales increased by 15% and no employees have left.On December 31, 2022, the sales increased by 15% and 50 employees left the entityWhat is the compensation expense for 2022?
Lawson will designate 150,000 shares of its $1 par value common stock for the granting of stock options to its officers and employees. Based on market prices, the exercise price for these options will be $25/share. Officers and employees are expected to stay employed with Lawson Company for 3 years from the date of grant to fulfill their service period. The CFO has performed a fair value calculation and has projected that the fair value of these options at the grant date will approximate $4,000,000. Lawson’s tax rate is 21%. Based upon the information provided, prepare the required journal entries and any other financial analysis necessary to demonstrate the financial reporting and tax impact of granting these options on January 1, 2022, and forward. Requirement 2 - Assuming this does not qualify as an incentive plan, answer the following questions, and provide the necessary journal entries, if any, Lawson will need to record. What journal entries (including the deferred…
Spaulding Inc. granted their executives incentive stock options on January 1, 2023. On this date, 275,000 shares of the company's $5 par value common stock were granted at an option price of $40 per share. On the grant date, the market price of the stock was $50 per share. Market prices of the stock were as follows: December 31, 2024 $70 per share December 31, 2025 $82 per share The Black-Scholes option pricing model determines total compensation expense to be $1,500,000. The service period for the options is 2 years. The options were exercisable beginning on January 1, 2025 for employees still working at Spaulding. The options expire on December 31, 2029. On June 1, 2025, 110,000 options were exercised and the market price on this date was $75. What amount should be debited to Paid-in Capital - Stock Options? a) $600,000 b) $0.0 c) $375,000 d) $750,000