On January 1, 2021, Purple Inc. issued stock options for 200,000 shares to division managers. The options have an estimated fair value of $6 each and vest in 3 years subject to conditions. The options are not exercisable unless divisional revenue increases by 6% 3 years. Purple initially estimates that it is probable the goal will be achieved. Required: a. What is the total estimated value of the stock option compensation? b. Write the journal entry required for 12/31/2021. c. At the end of the 2022, Purple estimates that it is not probable the goal will be achieved. Write the journal entry for 12/31/2022. d. At the end of 2023, Purple managers reach their goal of revenue increase. Write the journal entry required for 12/31/2023. e. Separate from the options above. Purple previously had granted and recognized stock options with a value of $200,000 that were exercised in 2023. The 40,000 stock options had a strike price of $20 and the market price of the common stock on the day of exercise was $28 per share. Record the journal entry to show the exercise of the options.
On January 1, 2021, Purple Inc. issued stock options for 200,000 shares to division managers. The options have an estimated fair value of $6 each and vest in 3 years subject to conditions. The options are not exercisable unless divisional revenue increases by 6% 3 years. Purple initially estimates that it is probable the goal will be achieved. Required: a. What is the total estimated value of the stock option compensation? b. Write the journal entry required for 12/31/2021. c. At the end of the 2022, Purple estimates that it is not probable the goal will be achieved. Write the journal entry for 12/31/2022. d. At the end of 2023, Purple managers reach their goal of revenue increase. Write the journal entry required for 12/31/2023. e. Separate from the options above. Purple previously had granted and recognized stock options with a value of $200,000 that were exercised in 2023. The 40,000 stock options had a strike price of $20 and the market price of the common stock on the day of exercise was $28 per share. Record the journal entry to show the exercise of the options.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:On January 1, 2021, Purple Inc. issued stock options for 200,000 shares to division managers. The options
have an estimated fair value of $6 each and vest in 3 years subject to conditions. The options are not
exercisable unless divisional revenue increases by 6% 3 years. Purple initially estimates that it is probable
the goal will be achieved.
Required:
a. What is the total estimated value of the stock option compensation?
b. Write the journal entry required for 12/31/2021.
c. At the end of the 2022, Purple estimates that it is not probable the goal will be achieved. Write the
journal entry for 12/31/2022.
d. At the end of 2023, Purple managers reach their goal of revenue increase. Write the journal entry
required for 12/31/2023.
e. Separate from the options above. Purple previously had granted and recognized stock options with a
value of $200,000 that were exercised in 2023. The 40,000 stock options had a strike price of $20 and the
market price of the common stock on the day of exercise was $28 per share. Record the journal entry to
show the exercise of the options.
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