Vancouver Inc. has an executive stock option plan. The plan entitles the President to purchase common shares following the conclusion of a 2-year vesting period that begins on the grant date of January 1, 2020. The president can exercise the stock options at any time from January 1, 2022 to December 31, 2026. The President exercises some of the stock options on June 30, 2022, but allows the rest of the options to lapse. Other details regarding the plan are as follows: Option price per share $ 51.17 Number of shares that can be purchased under the stock option plan 58,300 Number of shares purchased by the President on June 30, 2022 48,400 Market price of shares on January 1, 2020 $ 51.17 Market price of shares on December 31, 2020 $ 59.00 Market price of shares on December 31, 2021 $ 59.00 Market price of shares on June 30, 2022 $ 66.00 Vancouver estimates total compensation expense to be the following amount: $ 721,500 Required: a) What type of stock option plan has been granted? Explain your rationale. b) Prepare all journal entries relating to the stock option plan for 2020, 2021, 2022, and 2026. Assume that Vancouver has a December 31 year end.
Vancouver Inc. has an executive stock option plan. The plan entitles the President to purchase common shares following the conclusion of a 2-year vesting period that begins on the grant date of January 1, 2020. The president can exercise the stock options at any time from January 1, 2022 to December 31, 2026. The President exercises some of the stock options on June 30, 2022, but allows the rest of the options to lapse. Other details regarding the plan are as follows:
|
Option price per share |
$ 51.17 |
|
Number of shares that can be purchased under the stock option plan |
58,300 |
|
Number of shares purchased by the President on June 30, 2022 |
48,400 |
|
Market price of shares on January 1, 2020 |
$ 51.17 |
|
Market price of shares on December 31, 2020 |
$ 59.00 |
|
Market price of shares on December 31, 2021 |
$ 59.00 |
|
Market price of shares on June 30, 2022 |
$ 66.00 |
|
Vancouver estimates total compensation expense to be the following amount: |
$ 721,500 |
|
Required: |
|
|
a) |
What type of stock option plan has been granted? Explain your rationale. |
|
b) |
Prepare all and 2026. Assume that Vancouver has a December 31 year end. |
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