Ex 3. On December 31, 2026, Orange Mountain Co. grants its employees options to purchase 1,000 shares of $1 par common stock for $5 per share. The options vest after 1 year and expire on December 31, 2031. On the date of grant, the shares are trading for $10 per share and the Options have a fair value of $3 each. Make the journal entry to recognize the compensation expense associated with the options on December 31, 2027.
Ex 3. On December 31, 2026, Orange Mountain Co. grants its employees options to purchase 1,000 shares of $1 par common stock for $5 per share. The options vest after 1 year and expire on December 31, 2031. On the date of grant, the shares are trading for $10 per share and the Options have a fair value of $3 each. Make the journal entry to recognize the compensation expense associated with the options on December 31, 2027.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ex 3. On December 31, 2026, Orange Mountain Co. grants its employees options to purchase
1,000 shares of $1 par common stock for $5 per share. The options vest after 1 year and expire
on December 31, 2031. On the date of grant, the shares are trading for $10 per share and the
options have a fair value of $3 each.
Make the journal entry to recognize the compensation expense associated with the options on
December 31, 2027.
Assume all the options were exercised on January 1, 2028. Make the journal entry to recognize
the exercise of the stock options.
What additional information would you need to determine the effect of the stock options on
Dilutive EPS?
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