Concept explainers
a.
To calculate: The compensation cost to be recognized for the year and
Given Information:
Number of shares granted is 10.
Number of employees is 1,200.
Exercise price of the shares is $45.
Fair value at the grant date is $83.
Vesting period is 3 years.
Vesting probability is 100% in each year.
b.
The compensation expense for end of the year and journal entry of it.
Given Information:
Number of shares granted is 10.
Number of employees is 1,200.
Exercise price of the shares is $45.
Fair value at the grant date is $83.
Vesting period is 3 years.
Vesting probability is 80% in first year.
Vesting probability is 65% in second year.
Vesting probability is 75% in third year.
c.
The compensation expense for end of the year and journal entry of it.
Given Information:
Number of shares granted is 10.
Number of employees is 1,200.
Exercise price of the shares is $45.
Fair value at the grant date is $83.
Vesting period is 3 years.
Vesting probability is 80% in first year.
Vesting probability is 65% in second year.
Vesting probability is 75% in third year.
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INTERMEDIATE ACCT.-MYLAB COMBO ACCESS
- In connection with a stock option plan for the benefit of key employees, ABC Co. intends to distribute treasury shares when the options are exercised. These shares were bought in 20x3 at P42 per share. On January 1, 20x4, ABC Co. granted stock options for 100,000 shares at P38 per share as additional compensation for services to be rendered over the next 3 years. The options are exercisable during a 2-year period beginning January 1, 20x7, by grantees still employed by ABC Co. Market price of the ABC Co.’s stock was P47 per share at the grant date. The fair value of the stock option is P12 on grant date. No stock options were terminated during 20x4. Compute the amount of expense that should be recognized for 20x4.arrow_forwardOn December 31, 2016, Sedona Inc. granted 160,000 options to key executives. Each option allows the executive to purchase one common share at a price of $6. The options were exercisable beginning January 1, 2019, if the grantee was still employed by the company at the time of the exercise, and expire on December 31, 2020. On the grant date, shares were trading at $6 per share, and a fair value options pricing model determined total compensation to be $80,000. On May 1, 2019, 120,000 options were exercised when the market price of the shares was $7 per share. The remaining options lapsed on December 31, 2020 because the share price declined below $6. Assume that the entity follows IFRS. Prepare the necessary journal entries related to the stock option plan for the years ended December 31, 2016, through 2020arrow_forwardOn January 1, Year 1, Lasagna Corporation granted to an employee the right to choose either shares or cash payment. The choices are as follows: •Share alternative – equal to 25,000 shares with par value of P30 •Cash alternative – cash payment equal to the market value of 20,000 shares The grant is conditional upon the completion of three years of service. On grant date, on January 1, Year 1, the share price is P51. The share prices for the three-year vesting period are P54 on December 31, Year 1, P66 on December 31, Year 2 and P65 on December 31, Year 3. After taking into account the effect of vesting restrictions, the entity has estimated that the fair value of the share alternative is P48. What is the share premium if the employee has chosen the share alternative on December 31, Year 3? A. 750,000 B. 880,000 C. 550,000 D. 730,000arrow_forward
- On November 1, 2020, Ayayai Company adopted a stock-option plan that granted options to key executives to purchase 27,300 shares of the company’s $10 par value common stock. The options were granted on January 2, 2021, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $30, and the fair value option-pricing model determines the total compensation expense to be $409,500.All of the options were exercised during the year 2023: 18,200 on January 3 when the market price was $68, and 9,100 on May 1 when the market price was $78 a share.Prepare journal entries relating to the stock option plan for the years 2021, 2022, and 2023. Assume that the employee performs services equally in 2022 and 2023.arrow_forwardOn July 1, 2019, Windsor Company adopted a stock-option plan that granted options to key executives to purchase 86,000 shares of the company’s $1 par value common stock. The options were granted on January 1, 2020, and were exercisable 3 years after the date of grant if the grantee was still an employee of the company. The options expired 4 years from date of grant. The option price was set at $63, and the fair value option-pricing model determines the total compensation expense to be $612,000.All of the options were exercised February 1, 2023, when the market price was $75 a share.Prepare journal entries relating to the stock option plan for the years 2019 through 2023. Assume that the employee performs services equally in 2020, 2021 and 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round intermediate calculations to 5 decimal places,…arrow_forwardOn November 1, 2020, Novak Company adopted a stock-option plan that granted options to key executives to purchase 25,500 shares of the company's $9 par value common stock. The options were granted on January 2, 2021, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $50, and the fair value option-pricing model determines the total compensation expense to be $382,500. All of the options were exercised during the year 2023: 17,000 on January 3 when the market price was $65, and 8,500 on May 1 when the market price was $76 a share. Prepare journal entries relating to the stock option plan for the years 2021, 2022, and 2023. Assume that the employee performs services equally in 2022 and 2023. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and…arrow_forward
- Accounting for Stock Options On April 1 of Year 1, Badger Corp. announced a stock option incentive plan for its top executives. The plan provides certain executives stock options for the company's common stock. Each option allows for the purchase of one share of common stock, par $1, at a standard option price of $25 per share. 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 the exercise date, and the requisite service period ends on the first possible exercise date. On April 1 of Year 1, 4,000 options were granted to employees when the market price was $30 per share. Using an option-pricing model, the fair value of the options granted was $36,000. Employees exercised 2,400 options on June 30 of Year 4, when the market price of the stock was $45 per share. . a. Compute the total amount of compensation cost for the grant made on April 1 of Year 1. $ 36,000 ✔ b.…arrow_forwardOn November 1, 2020, Sweet Company adopted a stock-option plan that granted options to key executives to purchase 31,800 shares of the company’s $9 par value common stock. The options were granted on January 2, 2021, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $40, and the fair value option-pricing model determines the total compensation expense to be $477,000.All of the options were exercised during the year 2023: 21,200 on January 3 when the market price was $68, and 10,600 on May 1 when the market price was $78 a share.Prepare journal entries relating to the stock option plan for the years 2021, 2022, and 2023. Assume that the employee performs services equally in 2022 and 2023. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and…arrow_forwardOn January 1, 2020, Kingbird Corporation granted 1,800 shares of restricted $5 par value common stock to executives. The market price (fair value) of the stock is $67 per share on the date of grant. The period of benefit is 2 years. Prepare Kingbird’s journal entries for January 1, 2020, and December 31, 2020 and 2021arrow_forward
- JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a variety of share-based compensation plans. Under its nonqualified stock option plan, JBL granted options to key officers on January 1, 2016. The options permit holders to acquire six million of the company’s $1 par common shares for $22 within the next six years, but not before January 1, 2019 (the vesting date). The market price of the shares on the date of grant is $26 per share. The fair value of the 6 million options, estimated by an appropriate option pricing model, is $6 per option. Because the plan does not qualify as an incentive plan, JBL will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. The tax rate is 40%. Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on…arrow_forwardThe company established a stock appreciation rights program for the president. The program entitled the president to receive cash for the difference between the common shares fair value and the pre-established price of $20 which was the fair value on January 1, 2021 on 20,000 SARS. The date of the grant was January 1, 2021 and the required employment (service period) is two years. Assume the common shares' fair value fluctuated as follows: December 31, 2021, $24; December 31, 2022, $23 and December 31, 2023, $26. Assume, also, that the president exercised half of the SARS on January 1, 2024. Use ASPE but indicate how IFRS determines the value of Share Appreciation Rights|arrow_forwardPrepare the necessary entries from 1/1/17 through 2/1/19 for the following events using the fair value method. 1.) On 1/1/17, 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 2.) On 2/1/17, 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. The options expire on 2/1/19. It is assumed that the options were for services performed equally in 2017 and 2018. The Black-Scholes option-pricing model determines the total compensation expense to be $3,200,000. 3.) On 2/1/19, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited.arrow_forward