What amount should stellar corp recognize as compensation expense for 2020 on these general accounting question? On January 1, 2020, Stellar Corp granted 120,000 stock options to itsexecutives. The options are exercisable no sooner than December 31,2022, and expire on January 1, 2026. Each option can be exercised toacquire one share of $1 par common stock for $15. An option-pricingmodel estimates the fair value of the options to be $5 on the date ofgrant. What amount should Stellar Corp recognize as compensationexpense for 2020?

Step 1: Define Stock Option Compensation ExpenseStock option compensation expense is the cost…

Answered: On January 1, 2020, Stellar Corp…

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
Johnstone Co. purchased a put option on Ewing common shares on July 7, 2020, for $240. The put option is for 200 shares, and the strike price is $70. (The market price of a share of Ewing stock on that date is $70.) The option expires on January 31, 2021. The following data are available with respect to the put option. Date Market Price of Ewing Shares Time Value of Put Option September 30, 2020 $77 per share $125 December 31, 2020 75 per share 50 January 31, 2021 78 per share 0 Instructions Prepare the journal entries for Johnstone Co. for the following dates. a. July 7, 2020—Investment in put option on Ewing shares. b. September 30, 2020—Johnstone prepares financial statements. c. December 31, 2020—Johnstone prepares financial statements. d. January 31, 2021—Put option expires.
On January 1, 2021, M Company granted 90,000 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 $12. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. If unexpected turnover in 2022 caused the company to estimate that 10% of the options would be forfeited, what amount should M recognize as compensation expense for 2022? O $30,000. O $60,000. O $120,000. O $150,000.
On January 1, 2024, Sherwood 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 $8. An option-pricing model estimates the fair value of the options to be $3 on the date of grant. If unexpected turnover in 2025 caused the company to estimate that 15% of the options would be forfeited, what amount should Sherwood recognize as compensation expense for 2025?
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?
Warren Co. purchased a put option on Echo common shares on January 7, 2020, for $360. The put option is for 400 shares, and the strike price is $85 (which equals the price of an Echo share on the purchase date). The option expires on July 31, 2020. The following data are available with respect to the put option. Date Market Price of Echo Shares Time Value of Put Option March 31, 2020 $80 per share $200 June 30, 2020 82 per share 90 July 6, 2020 77 per share 25 Instructions Prepare the journal entries for Warren Co. for the following dates. a. January 7, 2020—Investment in put option on Echo shares. b. March 31, 2020—Warren prepares financial statements. c. June 30, 2020—Warren prepares financial statements. d. July 6, 2020—Warren settles the put option on the Echo shares.
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
Under its executive stock option plan, Sorensen Corporation granted options on January 1, 2024, that permit executives to purchase 31 million of the company's $1 par common shares within the next seven 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, $19 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 expired in 2030 without being exercised. By what amount will Sorensen's shareholders' equity be increased as a result of having granted the options?
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Under its executive stock option plan, N Corporation 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, $18 per share. The fair value of the options to buy each share, estimated by an appropriate option pricing model on the date of grant, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on reported earnings in the year after the options are granted to executives? O $0 O $20 million O $60 million O $90 million
On January 2, 2020, Ayayai Company purchases a call option for $310 on Merchant common stock. The call option gives Ayayai the option to buy 1,090 shares of Merchant at a strike price of $49 per share. The market price of a Merchant share is $49 on January 2, 2020 (the intrinsic value is therefore $0). On March 31, 2020, the market price for Merchant stock is $53 per share, and the time value of the option is $200. Prepare the journal entry to record the purchase of the call option on January 2, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 2, 2020 enter an account title to record the transaction on January 2, 2020 enter a debit amount enter a credit amount enter an account title to record the transaction on January 2, 2020 enter a debit…

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