On 5/5/2018, a CEO exercised 100 options to buy a company's stock at the $50 exercise price. The market price of the company's stock is $60 on that day. A company reissues treasury stock that originally cost $30 per share to provide the shares to the CEO. What is the correct journal entry for the May 2018 exercise of the stock options?

On 5/5/2018, a CEO exercised 100 options to buy a company's stock at the $50 exercise price. The market price of the company's stock is $60 on that day. A company reissues treasury stock that originally cost $30 per share to provide the shares to the CEO. What is the correct journal entry for the May 2018 exercise of the stock options?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock…

A: Answer:- Stock options provide the investor with a choice to purchase or sell the options or stock…

Q: On May 1, 2021, Roger Rabbit Company adopted a stock-option plan that granted options to key…

A: Journal entries refers to recording of the business transaction into the books or day book of the…

Q: Tri-Facet Ltd. issued 28,750 stock options on January 1, 2021, allowing its Chief Executive Officer…

A: To motivate employees for better performance and long relationship, companies offer employee stock…

Q: In 2018, Broyles, Inc. reacquired 3,000 shares of its common stock at $55 per share. In 2019,…

A: Treasury stock: Treaseury stock are the shares which are bought back by the company from the open…

Q: If Frank Corporation sells 100,000 shares of its new $1 par value common stock to investors for $1…

A: Journal entry for the sale of common stock is:

Q: Prepare the journal entries for all these transactions. Each transaction is independent from the…

A: When stock are issued at price which is more than the par value, the excess amount is transferred to…

Q: On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock…

A: 1. Martinez's stock option measurement date is the date on which the fair value of the stock options…

Q: Smith exercised her options on December 31, 2022, when the market price of the stock was $60 per…

A: The employee stock option plan is one of the incentive plans of the company for its employees in…

Q: Deborah Corporation had the following Treasury stock transactions during May 2020. Please record…

A: CALCULATION FOR JOURNAL ENTRIES AMOUNTS : DATE WORKING MAY 5 , 2020 800 SHARES X $20 =…

Q: On November 1, 2022, Sunland Inc. adopted a stock-option plan that granted options to key executives…

A: Common stocks are securities that represent a company's ownership. Common shareholders wield…

Q: On January 1, 2020, Vaughn Manufacturing issued 15,000 shares of $4 par value common stock for…

A: The journal entries are the first step of accounting to record the transactions on the regular…

Q: MacroApps Corporation's disclosure notes for the year ending June 30, 2020, included the following…

A: An Employee Stock Purchase Plan (ESPP) is a company-sponsored initiative that enables qualified…

Q: Throughout 2019, Hogan Corporation had 54,000,000 shares of common stock outstanding. In addition,…

A: Introduction Diluted earnings per share is used to estimate a company's profits per share as if all…

Q: The employees of Tenor Corporation exercise 10,000 stock options in 2021. Each option has an…

A: Common stock: These are the shares issued by a company to an outsider. These shares entitle a share…

Q: MacroApps Corporation's disclosure notes for the year ending June 30, 2020, included the following…

A: A company-sponsored program that allows eligible employees to acquire shares of their employer's…

Q: Grant, Inc. had 60,000 shares of treasury stock ($10 par value) at December 31, 2014, which it…

A: No. of shares of treasury stock at December 31, 2015 = No. of shares of treasury stock at December…

Q: If unexpected turnover in 2022 caused the company to estimate that 10% of the options would be…

A: Z Company Compensation expenses for 2021 = 100,000 * 5 = $500,000 = $500,000 / 4 = $125,000

Q: On October 15, 2020, the board of directors of ABC Corporation approved a stock option plan for key…

A: Answer:-Stock options provide the investor with a choice to purchase or sell the options or stock on…

Q: On April 1, 2023, Gamma Corp. purchases a call option for $500, which gives Gamma the right to buy…

A: The call option refers to the agreement between the buyer and lender where the the buyer has been…

Q: Microsoft Corporation's disclosure notes for the year ending June 30, 2020, Included the following…

A: An Employee Stock Purchase Plan (ESPP) is a company-sponsored initiative that enables qualified…

Q: Blue Devil Inc. completed the following transactions of stock issuance, treasury stock and stock…

Concept explainers

Employee Benefits

In an organization employees are the most important resource and most important asset. They can lead an organization to the sky or can be the reason for unsuccessful of business. Therefore, it is very much important that employees of an organization should be satisfied by the environment of the organization and most importantly with the salary, wages incentives, etc.

Question

On 5/5/2018, a CEO exercised 100 options to
buy a company's stock at the $50 exercise
price. The market price of the company's
stock is $60 on that day. A company reissues
treasury stock that originally cost $30 per
share to provide the shares to the CEO.
What is the correct journal entry for the May
2018 exercise of the stock options?
Dr. Cash
5,000
Cr. Gain on sale
2,000
Cr. Treasury Stock
3,000
Dr. Cash
5,000
Cr. APIC
2,000
Cr. Common Stock
3,000

Dr. Cash
6,000
Cr. APIC
3,000
Cr. Treasury Stock
3,000
Dr. Cash
6,000
Cr. APIC
3,000
Cr. Common Stock
3,000
Dr. Cash
5,000
Cr. APIC
2,000
Cr. Treasury Stock
3,000
Adjust
Draw

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1)

VIEW

Step 2)

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Accounting for Employee Compensations and Benefits

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Big-Funds Ltd. granted stock options to executives in early 2022. The stock options vest over four years and expire after six years. In total, the options allow the purchase of 40,000 shares at $10 per share. Option pricing models indicate that the options have a total fair value of $600,000. Estimates of retention are 80% at the end of 2022 and 75% at the end of 2023. Required: a) Provide the journal entries to be recorded with respect to the options at the end of 2022 and 2023. b) What would the balance be in the equity account for stock options at the end of the forth year if retention remained at 70%? c) Assume that actual retention was 70%, and the options were exercised at the end of the fourth year when the market price of common shares is $25. Provide the entry for exercise. d) Assume that retention was 70% but the options were allowed to lapse after six years when the price of common shares is $4. Provide the entry for the lapse.
The following events occurred at Charlotte Company surrounding stock options. Charlotte uses the fair value method of accounting for stock options. On 1/1/21 options were granted to each of four executives to purchase 5,000 shares (a total of 20,000 shares) of the company’s $2 par value common stock at a price of $25. The options were non-transferable and the executive had to remain an employee of the company through 12-31-22 to exercise the options. The options expire on 2/1/23. The Black-Scholes option pricing model determines the fair value of the options to be $1,350,000. On 4/5/22, one of the four executives resigned from the company. On 2/1/23, the remaining three executives exercised their options. Required: Prepare any necessary entries for 1/1/21, 12/31/21, 4/5/22, 12/31/22 and 2/1/23. If no entry is necessary, indicate as such.
On January 1 of Year 1, Holiday Inc. offered a stock option incentive plan to a top executive. The plan provided the executive 300 stock options for Holiday Inc. $1 par value, common stock at an option price of $15 per share through the expiration date of January 1 of Year 7. The fair value of the options based upon an option-pricing model on January 1 of Year 1, is $9,000. The market price at year-end of Holiday Inc. stock is $15 per share on January 1 of Year 1, and $18 on December 31 of Year 1. The requisite service period is 3 years. The options were not exercised due to the stock price remaining below $15 per share after the vesting period. Record the entry on January 1 of Year 7 for the expiration of the stock options. Note: If a line in a journal entry isn't required for the transaction, select "N/A—debit" and "N/A—credit" as the account names and leave the Dr. and Cr. answers blank (zero).
Yola Corporation is required to include 15 items in their 10-K for the year ending 9/30/21. In which required item from the 10-K would this content be located? "During the 4th quarter of fiscal 2021 we purchased 750,000 shares of company stock at an average price of $75 per share". Question 30 options: a) Market for Registrants Common Equity and Related Stockholders' Matters b) Legal Proceedings c) Business d) Financial Statements & Supplementary Data
On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 22 million stock options were granted, exercisable for 22 million shares of Martinez's $1 par common stock. • The options are exercisable between January 1, 2027, and December 31, 2029, at 80% of the quoted market price on January 1, 2024, which was $15. • The fair value of the 22 million options, estimated by an appropriate option pricing model, is $6 per option. • Martinez chooses the option to recognize forfeitures only when they occur. • Ten percent (2.2 million) of the options were forfeited when an executive resigned in 2025. • All other options were exercised on July 12, 2028, when the stock's price jumped unexpectedly to $21 per share. Required: 1. When is Martinez's stock option measurement date? 2. Determine the compensation expense for the stock option plan in 2024. (Ignore taxes.) 3. Prepare the journal entries to reflect the…
answer in text form please (without image), Note: .Every entry should have narration please
Doug Graves Cemetery had 69,000 shares of common stock issued and outstanding at January 1, 2021. During 2021, Graves took the following actions: June 1 Declared a 2-for-1 stock split, when the fair value of the stock was $44 per share. October 15 Declared a $0.50 per share cash dividend. In Graves's statement of shareholders' equity for 2021, what amount should Graves report as dividends?
Ricci Corporation is preparing their financial statements for the year ending September 30, 2021. Ricci Corporation has two categories of stock; Preferred and Common. On September 25, 2021 Ricci Corporation declared dividends on the preferred stock which will be paid on October 18, 2021. In order to calculate EPS the staff accountant had the following information: 2021 Net Income: $4,000,000 Preferred Dividends Declared in September 25, 2021 $ 500,000 but not paid until October 18, 2021 Weighted Average Number of Common Shares Outstanding 125,000 shares The staff accountant has determined that since the preferred dividends were not paid prior to September 30, 2021 the preferred dividend should not be included in the 2021 EPS. Accounting Issue: In the calculation for EPS should Ricci Corporation include the preferred dividends not paid prior to September 30, 2021? Your Interpretation of the Guidance: Should Ricci Corporation include the preferred dividends in the calculation of EPS…
Recording Stock Dividends and Stock Splits The records of Dixie Corporation showed the following balances on November 1, 2020. Common stock, $10 par, 48,000 shares outstanding $480,000 Paid-in capital in excess of par 163,200 320,000 Retained earnings The fair value of its stock is $18 per share. Accounting for Stock Dividends Accounting for Stock Splits Prepare journal entries for the following three separate scenarios. a. The company declares (November 1, 2020) and issues (November 20, 2020) a 10% stock dividend. b. The company declares (November 1, 2020) and issues (November 20, 2020) a 10% stock dividend. Of the 4,800 stock dividend shares, 4,480 shares are whole shares and 320 shares are fractional shares. It is the company's policy to pay out fractional shares in cash. c. The company declares (November 1, 2020) and issues (November 20, 2020) a stock split effected in the form of a 100% stock dividend. • Note: List multiple debits (when applicable) in alphabetical order and list…