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On January 1, 2024, Adams-Meneke Corporation granted 24 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, 2026 (the vesting date). • The exercise price is the market price of the shares on the date of grant, currently $32 per share. • The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. Management's policy is to estimate forfeitures. ● . No forfeitures are anticipated. Ignore taxes. ●

On January 1, 2024, Adams-Meneke Corporation granted 24 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, 2026 (the vesting date). • The exercise price is the market price of the shares on the date of grant, currently $32 per share. • The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. Management's policy is to estimate forfeitures. ● . No forfeitures are anticipated. Ignore taxes. ●

FINANCIAL ACCOUNTING
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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On January 1, 2024, Adams-Meneke Corporation granted 24 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, 2026 (the vesting date). • The exercise price is the market price of the shares on the date of grant, currently $32 per share. • The fair value of the options, estimated by an appropriate option pricing model, is $5 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, 2024. 2. Prepare the appropriate journal entry to record compensation expense on December 31, 2024. 3. Unexpected turnover during 2025 caused an estimate of the forfeiture of 5% of the stock options. Prepare the appropriate journal entry(s) on December 31, 2025 and 2026 in response to the new estimate. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Answer is not complete. Determine the total compensation cost pertaining to the options on January 1, 2024. Note: Enter your answer in millions (i.e., 10,000,000 should be entered as 10). Total compensation cost $ 120 million < Required 1 Required 2 >
Transcribed Image Text:On January 1, 2024, Adams-Meneke Corporation granted 24 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, 2026 (the vesting date). • The exercise price is the market price of the shares on the date of grant, currently $32 per share. • The fair value of the options, estimated by an appropriate option pricing model, is $5 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, 2024. 2. Prepare the appropriate journal entry to record compensation expense on December 31, 2024. 3. Unexpected turnover during 2025 caused an estimate of the forfeiture of 5% of the stock options. Prepare the appropriate journal entry(s) on December 31, 2025 and 2026 in response to the new estimate. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Answer is not complete. Determine the total compensation cost pertaining to the options on January 1, 2024. Note: Enter your answer in millions (i.e., 10,000,000 should be entered as 10). Total compensation cost $ 120 million < Required 1 Required 2 >
Prepare the appropriate journal entry to record compensation expense on December 31, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). No 1 Date December 31, 202 Compensation expense Show Transcribed Text < 1 Journal entry worksheet 2 Paid-in capital - stock options Note: Enter debits before credits. Record the compensation expense. Date December 31, 2025 Record entry General Journal Show Transcribed Text < Required 1 Note: Enter debits before credits. Date December 31, 2026 General Journal Journal entry worksheet < 1 2 Clear entry Record the compensation expense. c General Journal ✓ Required 3 > Debit 24.0 x Debit Credit Debit 24.0 x Credit View general journal Credit >
Transcribed Image Text:Prepare the appropriate journal entry to record compensation expense on December 31, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). No 1 Date December 31, 202 Compensation expense Show Transcribed Text < 1 Journal entry worksheet 2 Paid-in capital - stock options Note: Enter debits before credits. Record the compensation expense. Date December 31, 2025 Record entry General Journal Show Transcribed Text < Required 1 Note: Enter debits before credits. Date December 31, 2026 General Journal Journal entry worksheet < 1 2 Clear entry Record the compensation expense. c General Journal ✓ Required 3 > Debit 24.0 x Debit Credit Debit 24.0 x Credit View general journal Credit >
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