Marconi Corporation awarded fixed options to 100 employees on 1 January 2004 to acquire 20,000 shares of the company. The fair value of the option was determined to be GBP 1.20 using the Black-Scholes models and the exercise price was GBP 3.50 per share (same as the market price at 1 January 2004). Other terms of the options are shown as follows: a. The share option expired five years after the date of the grant. b. The employees must remain employed until 31 December 2006. c. The management estimated a forfeiture rate of 2%. This estimate was revised at the end of each year. d. In 2004, three employees left the firm and the forfeiture rate was revised to 5% at 31 December 2004. e. In 2005, another two employees left the firm and the forfeiture rate was maintained at 5% at 31 December 2005. f. In 2006, three employees left the firm. Required: 1. Calculate the remuneration expense relating to the share options for the following years 2004, 2005 and 2006. 2. Prepare the journal entries to record the share-based transactions for the period 2004 to 2006.
Marconi Corporation awarded fixed options to 100 employees on 1 January 2004 to acquire 20,000 shares of the company. The fair value of the option was determined to be GBP 1.20 using the Black-Scholes models and the exercise price was GBP 3.50 per share (same as the market price at 1 January 2004).
Other terms of the options are shown as follows:
a. The share option expired five years after the date of the grant.
b. The employees must remain employed until 31 December 2006.
c. The management estimated a forfeiture rate of 2%. This estimate was revised at the end of each year.
d. In 2004, three employees left the firm and the forfeiture rate was revised to 5% at 31 December 2004.
e. In 2005, another two employees left the firm and the forfeiture rate was maintained at 5% at 31 December 2005.
f. In 2006, three employees left the firm.
Required:
1. Calculate the remuneration expense relating to the share options for the following years 2004, 2005 and 2006.
2. Prepare the
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