On January 1, 2020, Easy Company granted 30,000 share options to employees. The share options will vest at the end of three years provided the employees remain in service until then. The option price is P60 and the entity's share price is also P60 at the date of grant. The par value of the share is P50. At the date of grant, the entity concluded that the fair value of the share options cannot be estimated reliably. The share options have a life of 6 years. This means that the options can be exercised within three years after vesting. All share options vested at the end of three years and no employees left during the three- year period. The share prices and the number of share options exercised are set out below.                        Share Price            Share options exercised at year-end 2020                   63 2021                   66 2022                   75 2023                   88                                   10,000 2024                  100                                  15,000 2025                    90                                    5,000 Required: Determined the compensation expense for each year from 2020 to 2025 using the intrinsic value method. Prepare journal entries to record the compensation expense each year and the exercise of the share options.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On January 1, 2020, Easy Company granted 30,000 share options to employees.

The share options will vest at the end of three years provided the employees remain in service until then.

The option price is P60 and the entity's share price is also P60 at the date of grant. The par value of the share is P50.

At the date of grant, the entity concluded that the fair value of the share options cannot be estimated reliably.

The share options have a life of 6 years. This means that the options can be exercised within three years after vesting.

All share options vested at the end of three years and no employees left during the three- year period.

The share prices and the number of share options exercised are set out below.

                       Share Price            Share options exercised at year-end

2020                   63

2021                   66

2022                   75

2023                   88                                   10,000

2024                  100                                  15,000

2025                    90                                    5,000

Required:

  1. Determined the compensation expense for each year from 2020 to 2025 using the intrinsic value method.
  2. Prepare journal entries to record the compensation expense each year and the exercise of the share options.
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