On January 1, 2016, M Company granted 93,000 stockoptions to certain executives. The options are exercisableno sooner than December 31, 2018, and expire on January1, 2022. Each option can be exercised to acquire one shareof $1 par common stock for $12. An option-pricing modelestimates the fair value of the options to be $4 on the dateof grant. What amount should M recognize ascompensation expense for 2016?

1. Calculate Total Compensation Cost:Number of options granted: 93,000Fair value per option: $4Total…

Answered: On January 1, 2016, M Company granted…

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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Fortune Brands granted options on January 1, 2024, that allows the recipient to purchase 15.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2026 (the vesting date). The exercise price is the market price of the shares on the date of grant, $17 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives? Note: Round your answer to 1 decimal place. Multiple Choice O $60.0 million $90.0 million $0 $20.0 million
On January 1, 2024, Donnelly Company granted 97,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2026, and expire on January 1, 2030. Each option can be exercised to acquire one share of $1 par common stock for $9. An option-pricing model estimates the fair value of the options to be $3 on the date of grant. What amount should Donnelly recognize as compensation expense for 2024? Note: Round your answer to the nearest dollar amount.
On January 1, 2021, M Company granted 95,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2023, and expire on January 1, 2027. Each option can be exercised to acquire one share of $1 par common stock for $13. An option-pricing model estimates the fair value of the options to be $4 on the date of grant. What amount should M recognize as compensation expense for 2021? (Round your answer to the nearest dollar amount.)
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?
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?
Under its executive stock option plan, Mining Co. granted options on January 1, 2021, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $22 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. The options are exercised on April 2, 2024, when the market price is $21 per share. By what amount will the shareholders' equity increase when 100% of those options are exercised? O $60 million $270 million O $315 million. O $330 million
On January 1, 2021, Howmet Aerospace granted options that permit executives to purchase 34 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $19 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. No forfeitures are anticipated. The options are exercised on April 2, 2024, when the market price is $22 per share. By what amount will Howmet's shareholder's equity be increased when the options are exercised? Multiple Choice $170 million. $782 million. $816 million. $646 million.
On January 1, 2018, Adams-Meneke Corporation granted 25 million incentive stock options to division managers, each permitting holders to purchase one share of the company’s $1 par common shares within the next sixyears, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shareson the date of grant, currently $10 per share. The fair value of the options, estimated by an appropriate optionpricing model, is $3 per option. Management’s policy is to estimate forfeitures. No forfeitures are anticipated.Ignore taxes.Required:1. Determine the total compensation cost pertaining to the options on January 1, 2018.2. Prepare the appropriate journal entry to record compensation expense on December 31, 2018.3. Unexpected turnover during 2019 caused an estimate of the forfeiture of 6% of the stock options. Determinethe adjusted compensation cost, and prepare the appropriate journal entry(s) on December 31, 2019 and 2020.
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
Modern Corporation granted 95,000 stock options to certain executives on January 1, 2022. The options are exercisable no sooner than December 31, 2024, and expire on January 1, 2028. Each option can be exercised to acquire one share of $1 par common stock for $11. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. How much compensation expense should Modern recognize in 2022 as a result of this stock option grant?
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 $130 per share, with an expiration date of June 30, 2022. The option contract premium (the amount paid to enter the contract at signing) was $70. Wilson settled the option on June 15, when a market appraisal estimated the time value of the option to be $50 (assume cash settlement). Prices of FVA stock during the option period are provided below. June 15 June 30 $125 $135 Price of FVA stock: April 1 $130 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.)
On March 1, 2022, Jensen Corp. purchased a call option on shares of YTV stock. The contract was for 100 shares at a strike price of $120 per share, with an expiration date of May 31, 2022. The option contract premium was $30. On March 31, a market appraisal estimated the time value of the option to be $20. Jensen settled the option contract on May 10. Prices of YTV stock during the option period are provided below. March 1 March 31 May 10 Price of YTV stock: $120 $110 $115 At what amount would Jensen report as the value of the call option in its March 31, 2022 balance sheet? Call option account balance as off March 31 :

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