Recording Stock Options: Issuance and ExerciseIn October 2019, Meno Corp. announced a stock option incentive plan for its top executives. The plan provideseach executive 6,000 stock options for Meno's common stock, $1 par, at an exercise price of $36 per sharereduced by the percentage increase in EPS from December 31, 2019, to December 31, 2021. The rights arenontransferable and are exercisable three years after the grant date and prior to five years from the grant date.Continuing employment is required through exercise date, and the requisite service period ends on the firstpossible exercise date.On January 1, 2020, Martha Smith was granted 3,000 options when the market price was $30 per share. Using anoption-pricing model, the fair value of the options granted to Smith was valued at $9 per option. On December31, 2020, Meno's management believed that Smith would exercise her options at the first exercise date. ByDecember 31, 2021, Meno's EPS had increased by 20%.Smith exercised her options on December 31, 2022, when the market price of the stock was $60 per share.a. Compute the total amount of compensation cost for the grant made to Smith.$0xb. What entry should be made on the date of the grant?c. What entry should be made on December 31, 2020?d. Provide the entry to record the exercise of the options held by Smith on December 31, 2022.• Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr.and Cr. answers blank (zero).• Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) inalphabetical order.Dateb.C.d.Jan. 1, 2020N/AN/ADec. 31, 2020 Compensation ExpenseChackAccount NameDec. 31, 2022 CashPaid-in Capital-Stock Options✓# ✓✓÷ ✓✓÷ ✓Paid-in Capital in Excess of Par-Common Stock #0000Paid-in Capital-Stock OptionsCommon Stock+÷Dr.0✓0✓0x0✔0xox0✔0✓Cr.0✓0✓0x0✓0✔0x0x

The employee stock option plan is one of the incentive plans of the company for its employees in…

Smith exercised her options on December 31, 2022, when the market price of the stock was $60 per share. a. Compute the total amount of compensation cost for the grant made to Smith. $0 x b. What entry should be made on the date of the grant? c. What entry should be made on December 31, 2020? d. Provide the entry to record the exercise of the options held by Smith on December 31, 2022. • Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). • Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order. Date b. C. d. Jan. 1, 2020 N/A N/A Dec. 31, 2020 Compensation Expense Chocke Account Name Dec. 31, 2022 Cash Paid-in Capital-Stock Options ÷ + ✓ + ✓ ÷ → Paid-in Capital-Stock Options Common Stock Paid-in Capital in Excess of Par-Common Stock # V ✓ Dr. 0✓ 0✓ 0x 0 0x 0x 0✔ 0✓ Cr. 0 0✓ 0✓ 0x 0✓ 0✓ 0x 0x

Smith exercised her options on December 31, 2022, when the market price of the stock was $60 per share. a. Compute the total amount of compensation cost for the grant made to Smith. $0 x b. What entry should be made on the date of the grant? c. What entry should be made on December 31, 2020? d. Provide the entry to record the exercise of the options held by Smith on December 31, 2022. • Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). • Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order. Date b. C. d. Jan. 1, 2020 N/A N/A Dec. 31, 2020 Compensation Expense Chocke Account Name Dec. 31, 2022 Cash Paid-in Capital-Stock Options ÷ + ✓ + ✓ ÷ → Paid-in Capital-Stock Options Common Stock Paid-in Capital in Excess of Par-Common Stock # V ✓ Dr. 0✓ 0✓ 0x 0 0x 0x 0✔ 0✓ Cr. 0 0✓ 0✓ 0x 0✓ 0✓ 0x 0x

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 7E

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Recording Stock Options: Issuance and Exercise In October 2019, Meno Corp. announced a stock option incentive plan for its top executives. The plan provides each executive 9,000 stock options for Meno’s common stock, $1 par, at an exercise price of $36 per share reduced by the percentage increase in EPS from December 31, 2019, to December 31, 2021. The rights are nontransferable and are exercisable three years after the grant date and prior to five years from the grant date. Continuing employment is required through exercise date, and the requisite service period ends on the first possible exercise date.On January 1, 2020, Martha Smith was granted 3,000 options when the market price was $30 per share. Using an option-pricing model, the fair value of the options granted to Smith was valued at $9 per option. On December 31, 2020, Meno’s management believed that Smith would exercise her options at the first exercise date. By December 31, 2021, Meno’s EPS had increased by 20%. Smith…
Q. M Company issued 99,000 stock options to key executives on January 1, 2021. The options must be exercised by December 31, 2023, and will expire on January 1, 2027. Each option entitles the holder to one share of $1 par ordinary stock for $12. On the date of award, an option-pricing model estimates the fair value of the options to be $4. What should M deduct as compensation expense in 2021?
LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2021. The options entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement of specific financial goals over the next four years. Attainment of these goals is considered probable initially and throughout the service period. The options have a current fair value of $12 per option.Required:1. Prepare the appropriate entry when the options are awarded on January 1, 2021.2. Prepare the appropriate entries on December 31 of each year 2021–2024.3. Suppose at the beginning of 2023, LCI decided it is not probable that the performance objectives will be met. Prepare the appropriate entries on December 31 of 2023 and 2024.
LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2018. Theoptions entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement ofspecific financial goals over the next four years. Attainment of these goals is considered probable initially andthroughout the service period. The options have a current fair value of $12 per option.Required:1. Prepare the appropriate entry when the options are awarded on January 1, 2018.2. Prepare the appropriate entries on December 31 of each year 2018–2021.3. Suppose at the beginning of 2020, LCI decided it is not probable that the performance objectives will be met.Prepare the appropriate entries on December 31 of 2020 and 2021.
Prepare journal entries relating to the stock option plan on the following dates using the fair value method. If no entry is needed, write "No Entry Necessary." Show your work for partial credits. On November 1, 2019, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 30,000 shares of common stock at $40 per share. The par value is $10 per share. On January 1, 2020, options were granted to each of five executives to purchase 30,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. It is assumed that the options were for services performed equally in 2020 and 2021. The Black-Scholes option pricing model determines total compensation expense to be $3,200,000. At February 1, 2022, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited on January 1, 2028
At January 1, 2021, the company had issued 40,000 executive stock options permitting executives to buy 40,000 shares of stock for $25. The vesting schedule is 20% the first year, 30% the second year, and 50% the third year (graded-vesting). The fair value of the options is estimated as follows: Vesting Date Amount Vesting Fair Value per Option Dec. 31, 2021 20 % 2$ Dec. 31, 2022 30 % 2$ 8 Dec. 31, 2023 50 % $ 12 What is the compensation expense related to the options to be recorded in 2021? O $48,000. $96,000. O $128,000. O $184,000.
Big-Funds Ltd. granted stock options to executives in early 2022. The stock options vest over four years and expire after six years. In total, the options allow the purchase of 40,000 shares at $10 per share. Option pricing models indicate that the options have a total fair value of $600,000. Estimates of retention are 80% at the end of 2022 and 75% at the end of 2023. Required: a) Provide the journal entries to be recorded with respect to the options at the end of 2022 and 2023. b) What would the balance be in the equity account for stock options at the end of the forth year if retention remained at 70%? c) Assume that actual retention was 70%, and the options were exercised at the end of the fourth year when the market price of common shares is $25. Provide the entry for exercise. d) Assume that retention was 70% but the options were allowed to lapse after six years when the price of common shares is $4. Provide the entry for the lapse.
On January 1, 2018, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2020, and expire on January 1, 2024. Each option can be exercised to acquire one share of $1 par common stock for $12. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. If unexpected turnover in 2019 caused the company to estimate that 15% of the options would be forfeited, what amount should M recognize as compensation expense for 2019?
XYZ Company issued 99,000 stock options to key executives on January 1, 2021. The options must be exercised by December 31, 2023, and will expire on January 1, 2027. Each option entitles the holder to one share of $1 par ordinary stock for $12. On the date of award, an option-pricing model estimates the fair value of the options to be $4. What should XYZ deduct as compensation expense in 2021?
E-On January 1, 2020, Orr Co. established a stock appreciation rights plan for its executives. They could receive cash at any time during the next four years equal to the difference between the market price of the common stock and a preestablished price of $16 on 600,000 SARs. The market price is as follows: 12/31/20—$21; 12/31/21—$18; 12/31/22—$19; 12/31/23—$23. On December 31, 2022, 95,000 SARs are exercised, and the remaining SARs are exercised on December 31, 2023. Instructions (a) Prepare a schedule that shows the amount of compensation expense for each of the four years starting with 2020. (b) Prepare the journal entry at 12/31/21 to record compensation expense. (c) Prepare the journal entry at 12/31/23 to record the exercise of the remaining SARs
In order to retain certain key executives, Wildhorse Corporation granted them incentive stock options on December 31, 2024. A total of 152000 options were granted at an option price of $35 per share. Market prices of the stock were as follows: December 31, 2025 December 31, 2026 The options were granted as compensation for executives' services to be rendered over a two-year period beginning January 1, 2025. The Black-Scholes option-pricing model determined total compensation expense to be $1501000. $44 per share 49 per share What amount of compensation expense should Wildhorse recognize as a result of this plan for the year ended December 31, 2025 under the fair value method? O $750500 $1653000 $1501000 $2622950
LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2016. The options entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement of specific financial goals over the next four years. Attainment of these goals is considered probable initially and throughout the service period. The options have a current fair value of $12 per option. Required: 1. Prepare the appropriate entry when the options are awarded on January 1, 2016. 2. Prepare the appropriate entries on December 31 of each year 2016–2019. 3. Suppose at the beginning of 2018, LCI decided it is not probable that the performance objectives will be met. Prepare the appropriate entries on December 31 of 2018 and 2019.