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a. Compute the total amount of compensation cost for the grant made to Smith. $Answer 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.

a. Compute the total amount of compensation cost for the grant made to Smith. $Answer 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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 2,400 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 2,400 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 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. $Answer 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 Dec. 31, 2020 Dec. 31, 2022 Account Name ◆ ◆ ◆ ♦ ◆ ◆ ◆ ◆ Dr. 0 ooooooo 0 0 Cr. OOO OOO OO 0 0
Transcribed Image Text: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 2,400 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 2,400 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 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. $Answer 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 Dec. 31, 2020 Dec. 31, 2022 Account Name ◆ ◆ ◆ ♦ ◆ ◆ ◆ ◆ Dr. 0 ooooooo 0 0 Cr. OOO OOO OO 0 0
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