) Drie Company granted 126,000 stock options to employees on 12/31/2021 as compensationover the next 3 years. The options had a strike price of $41 per share and market prices of $49 on12/31/2022 and $47 on 12/31/2023. If they originally estimated the original fair value to be $1,260,000,how much compensation expense should they recognize on 12/31/2023, assuming that the options canonly be used to purchase stock? ( ¹)O $1,008,000O $756,000O $252,000O $420,000

Initially compensation is recognized at the FV of option as per grant date.If there is change in…

Answered: ) Drie Company granted 126,000 stock…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Mann Inc. offers a restricted stock award plan to its vice presidents. On January 1, 2021, the corporation granted 10 million of its $5 par common shares, subject to forfeiture if employment is terminated within two years. The common shares have a market value of $10 per share on the date the award is granted. Required:1. Assume that no shares are forfeited. Determine the total compensation cost pertaining to the restricted shares.2. Prepare the appropriate journal entries related to the restricted stock through December 31, 2022.
On April 1, 2022, Wilson Corp. purchased a call option on shares of FVA stock. The contract was for 100 shares at a strike price of $110 per share, with an expiration date of June 30, 2022. The option contract premium (the amount paid to enter the contract at signing) was $50. Wilson settled the option on June 15, when a market appraisal estimated the time value of the option to be $30 (assume cash settlement). Prices of FVA stock during the option period are provided below. Price of FVA stock: April 1 $110 June 15 $115 June 30 $105 What amount of gain or loss on settlement is recorded in the journal entry to record the settlement of the option contract? (Loss amounts should be indicated with a minus sign.) Amount of Gain or (Loss) on Settlement: $ 1,500
Heidi Software Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, the company granted options on January 1, 2021, that permit executives to acquire 9 million of the company’s $1 par common shares within the next five years, but not before December 31, 2022 (the vesting date). The exercise price is the market price of the shares on the date of grant, $35.00 per share. The fair value of the 9 million options, estimated by an appropriate option pricing model, is $8 per option. No forfeitures are anticipated. Ignore taxes. Required: 1. Determine the total compensation cost pertaining to the options.2. Prepare the appropriate journal entry to record the award of options on January 1, 2021.3. Prepare the appropriate journal entry to record compensation expense on December 31, 2021.4. Prepare the appropriate journal entry to record compensation expense on December 31, 2022.
Palvinder Inc. has an employee share option plan (ESOP) for its senior executives. On January 1, 2020, 20,000 options were granted under this plan. The options had an exercise price of $20 per share, and 100% of the options have vested. Details of the share option plan are as follows: When granted, the fair value of the ESOP using an appropriate option-pricing model was $120,000. On February 1, 2023, 7,000 options were exercised. The market price of Palvinder’s shares on this date was $24. On July 1, 2024, 8,000 options were exercised. The market price of Palvinder’s shares on this date was $28. The remaining options were not exercised and expired on December 31, 2025. The market price of Palvinder’s shares on this date was $19. On December 31, 2025, when the remaining options expired, what amount should have been credited to the contributed surplus — expired share options account? Assume Palvinder reports under ASPE. Question 13 options: a) $0…
On April 1, 2023, Gamma Corp. purchases a call option for $500, which gives Gamma the right to buy 1,000 shares of Delta Inc. for $30 each until December 1, 2023. Delta Inc. shares are currently trading for $30. At June 30, 2023, the options are trading at $4,800 and the shares at $32 each. At December 1, 2023, the options expire with no value. The entry to record the purchase of the call option is: a. Derivatives-Financial Assets. Cash. 500 500 b. Cash. 500 Derivatives Financial Assets. 500 c. FV-NI Investments. Cash... 500 500 d. No entry required. Please dont provide solution image based thanx
On Jan. 1, 2020, Hufflepuff Industries, Inc. issues stock options for 100,000 shares to a regional manager. The options have an estimated fair value of $6 each. The provide additional incentive for the manager's achievement, the options are not exercisable unless the region revenue increase by 8% in three years. Hufflepuff initially estimates that it is probable that the goal will be achieved. How much compensation will be recorded in 2020, 2021, and 2022, the vesting period?
On January 1, 2022, Rosewood Corp. purchased a put option on shares of ICM stock. Terms of the contract were as follows: Number of shares: 100 Strike price: $200 per share Expiration date: May 31, 2022 Total cost of the option contract: $80 Seller of the option contract: First Investment Bank On January 1, 2022, ICM stock was trading at $200 per share.The following additional information is known: On March 31, 2022, the price of ICM stock was $220 per share. A market appraisal indicated that the time value of the option contract was $60. On May 10, 2022, the price of ICM stock was $185 per share. A market appraisal indicated that the time value of the option contract was $50. On this date, Rosewood settled the option contract. What is the dollar value of put option that Rosewood Corp. would have included in its March 2022 quarterly financial statements?
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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, 2021. The options permit holders to acquire 9 million of the company's $1 par common shares for $30 within the next six years, but not before January 1, 2024 (the vesting date). The market price of the shares on the date of grant is $34 per share. The fair value of the 9 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 25%.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…
Barron Company granted 8 million of its no par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $3 per share on January 1, 2021, the grant date. When calculating diluted EPS at December 31, 2022, what will be the net increase in the denominator of the EPS fraction if the market price of the common shares averaged $4 per share during 2022? A. 6 million B. 2.67 million C. 2 million D. 8 million
On January 1, 2019, a company granted 100,000 options to key executives. Each option allows the executive to purchase one share of the company’s $16 par value common stock at a price of $42 per share. The options were exercisable within a 2-year period beginning January 1, 2022. On the grant date, a fair value option-pricing model determines total compensation to be $300,000. On January 1, 2022, 6,000 options were exercised. In the journal entry to record the exercise, how much should be recorded for Paid-in Capital in Excess of Par – common stock?
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?

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