On January 1, 2021, Adams-Meneke Corporation granted 15 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 six 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, currently $12 per share. The fair value of the options, estimated by an appropriate option pricing model, is $2 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, 2021. 2. Prepare the appropriate journal entry to record compensation expense on December 31, 2021. 3. Unexpected turnover during 2022 caused an estimate of the forfeiture of 5% of the stock options. Prepare the appropriate journal entry(s) on December 31, 2022 and 2023 in response to the new estimate.

On January 1, 2021, Adams-Meneke Corporation granted 15 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 six 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, currently $12 per share. The fair value of the options, estimated by an appropriate option pricing model, is $2 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, 2021. 2. Prepare the appropriate journal entry to record compensation expense on December 31, 2021. 3. Unexpected turnover during 2022 caused an estimate of the forfeiture of 5% of the stock options. Prepare the appropriate journal entry(s) on December 31, 2022 and 2023 in response to the new estimate.

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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