Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition
1st Edition
ISBN: 9780134047430
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 19, Problem 19.5BE
To determine
The treatment of exercising the stock option plan by theemployee and journal entries to record it.
Giveninformation:
Number of shares given as an option is 5,000
Par value of common stock is $1.
Fair value of shares at grant date is $100,000.
Exercise price per option is $8 each.
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Prepare 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.
Rich Drennen’s personal statement of financial condition at December 31, 20X6, shows net worth of $400,000 before consideration of employee stock options owned on that date. Information relating to the stock options is as follows:
Options are to purchase 10,000 shares of Oglesby Corporation stock.
Options’ exercise price is $10 a share.
Options expire on June 30, 20X7.
Market price of the stock is $25 a share on December 31, 20X6.
The exercise of the options in 20X7 would result in ordinary income taxable at 35 percent.
After giving effect to the stock options, Drennen’s net worth at December 31, 20X6, would be
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
Chapter 19 Solutions
Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition
Ch. 19 - What is the allocation period used to expense...Ch. 19 - How do companies account for stock-based...Ch. 19 - Do companies with equity-based compensation plans...Ch. 19 - When accounting for employee stock options, will a...Ch. 19 - Prob. 19.5QCh. 19 - Prob. 19.6QCh. 19 - Prob. 19.7QCh. 19 - Prob. 19.8QCh. 19 - Prob. 19.9QCh. 19 - Prob. 19.10Q
Ch. 19 - Prob. 19.1MCCh. 19 - Prob. 19.2MCCh. 19 - Prob. 19.3MCCh. 19 - Prob. 19.4MCCh. 19 - Prob. 19.5MCCh. 19 - Prob. 19.6MCCh. 19 - Prob. 19.7MCCh. 19 - Prob. 19.8MCCh. 19 - Prob. 19.1BECh. 19 - Prob. 19.2BECh. 19 - Prob. 19.3BECh. 19 - Prob. 19.4BECh. 19 - Prob. 19.5BECh. 19 - Prob. 19.6BECh. 19 - Employee Stock Options, Liability-Classified...Ch. 19 - Prob. 19.8BECh. 19 - Prob. 19.9BECh. 19 - Prob. 19.10BECh. 19 - Prob. 19.11BECh. 19 - Prob. 19.12BECh. 19 - Prob. 19.13BECh. 19 - Prob. 19.14BECh. 19 - Prob. 19.15BECh. 19 - Prob. 19.16BECh. 19 - Prob. 19.17BECh. 19 - Prob. 19.18BECh. 19 - Prob. 19.19BECh. 19 - Prob. 19.20BECh. 19 - Prob. 19.21BECh. 19 - Prob. 19.22BECh. 19 - Prob. 19.23BECh. 19 - Prob. 19.24BECh. 19 - Prob. 19.1ECh. 19 - Prob. 19.2ECh. 19 - Prob. 19.3ECh. 19 - Prob. 19.4ECh. 19 - Prob. 19.5ECh. 19 - Prob. 19.6ECh. 19 - Prob. 19.7ECh. 19 - Prob. 19.8ECh. 19 - Prob. 19.9ECh. 19 - Prob. 19.11ECh. 19 - Prob. 19.12ECh. 19 - Prob. 19.1PCh. 19 - Prob. 19.2PCh. 19 - Prob. 19.3PCh. 19 - Prob. 19.4PCh. 19 - Prob. 19.5PCh. 19 - Prob. 19.6PCh. 19 - Prob. 19.7PCh. 19 - Prob. 19.8PCh. 19 - Prob. 19.9PCh. 19 - Prob. 19.10PCh. 19 - Prob. 19.11PCh. 19 - Prob. 19.12PCh. 19 - Prob. 1JCCh. 19 - Prob. 1FSACCh. 19 - Prob. 2FSACCh. 19 - Prob. 1SSCCh. 19 - Prob. 2SSCCh. 19 - Prob. 3SSCCh. 19 - Prob. 4SSCCh. 19 - Basis for Conclusions Case 1: Are Employee Stock...Ch. 19 - Prob. 2BCC
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