On January 1, 2020, the shareholders of Fire Red Company approved a plan granting certain officers of thecompany nontransferable options to buy 50,000 shares of P 100 par ordinary share capital at P 280 per share.The option-pricing model used by the company indicates that the fair value of each option on January 2,2020 isP 30. The plan provides that the officers must be employed by the company until December 31,2022 and thatoptions will expire at the end of 2023.At December 31, 2020, it was expected that 45,000 share options would vest, although in June 2021 someofficers with 6,000 shares options left the entity. At the end of 2021, it was estimated that no other officersholding share options would leave before vesting of the options. However, an officer holding 1,500 share optionsleft the entity in August 2022. All remaining options were exercised during 2023.REQUIRED:a) Prepare journal entries in the books of Fire Red Company pertaining to the options for years 2020-2023, inclusive.

Employees Stock Option Most of the companies practice to provide the stock option facility to their…

Answered: On January I, 2020, the shareholders of…

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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1.On January 1, 2019, a company granted 100,000 options to key executives. Each option allows the executive to purchase one share of the company's $14 par value common stock at a price of $44 per share. The options were exercisable within a 2-year period beginning January 1, 2022. On the grant date, a fair value option-pricing model determines total compensation to be $800,000. On January 1, 2022, 1,000 options were exercised. In the journal entry to record the exercise, how much should be recorded for Paid-in Capital in Excess of Par – common stock? 2.A company issued 13,000 shares of $22 par value common stock upon conversion of 24,000 shares of $34 par value preferred stock. The preferred stock was originally issued at $43 per share. The common stock is trading at $22 per share at the time of conversion. In the journal entry to record the conversion of the preferred stock, how much should we record for Paid-in Capital in Excess of Par - common stock?
On January 1, 2019, an entity granted 10,000 share options to employees. The share optionsvest at December 31, 2020 provided the employees remain in service until then.The fair value of the share option cannot be estimated reliably. The par value per ordinaryshare is P100.The option price is P125 and the market value of the ordinary share is also P125 at the dateof grant. All share options vested on December 31, 2020 and no employees left the entity.The share options can be exercised starting January 1, 2021 and expire two years after. Allshare options are exercised on December 31, 2021. The share market prices are P150 onDecember 31, 2019, P180 on December 31, 2020 and P200 on December 31, 2021.Required:A. Prepare journal entries from 2019 to 2021
JBL Aircraft manufactures and distributes aircraft parts and supplies. Employees are offered a varlety of share-based compensation plans. Under its nonqualified stock option plan, JBL granted options to key officers on January 1, 2021. The options permit holders to acquire 5 million of the company's $1 par common shares for $31 within the next six years, but not before January 1, 2024 (the vesting date). The market price of the shares on the date of grant is $35 per share. The fair value of the 5 million options, estimated by an appropriate option pricing model, is $6 per option. Because the plan does not qualify as an incentive plan, JBL will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. The tax rate is 25%. Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. Prepare the appropriate journal entries to record compensation expense and its tax effect on…
On January 1, 2019, Flounder Corporation granted 9,400 options to key executives. Each option allows the executive to purchase one share of Flounder’s $5 par value common stock at a price of $20 per share. The options were exercisable within a 2-year period beginning January 1, 2021, if the grantee is still employed by the company at the time of the exercise. On the grant date, Flounder’s stock was trading at $26 per share, and a fair value option-pricing model determines total compensation to be $404,000.On May 1, 2021, 7,520 options were exercised when the market price of Flounder’s stock was $30 per share. The remaining options lapsed in 2023 because executives decided not to exercise their options.Prepare the necessary journal entries related to the stock option plan for the years 2019 through 2023. (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…
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 1, 2021, a company granted stock options for 89,000 shares of its $12 par value common stock to its key employees. Each option entitles the employees to purchase one share of common stock at $22. The Black-Scholes option pricing model determines total compensation expense to be $220,000. The options are exercisable beginning January 1, 2024. On January 1, 2024, when the market price of the stock was $35 per share, 5,000 options were exercised. To record the 5,000 options exercised, the company should record Cash in the amount of $__________. (if no cash amount should be recorded, then enter 0).
The first financial instrument was a compensatory stock option plan that was granted to 12 key management positions for the first time. The company wanted to provide these employees with additional compensation and due to financial constraints could not increase salaries. The plan granted these management employees 7,500 options each to purchase shares at $40 each when they were actually worth $80. The options were granted on January 1, 2021 and were exercisable within a two year period beginning January 1, 2023 if the employee was still employed with the company at the time of exercise. A fair value options pricing model determined total compensation to be $820,000. Assume that there are no forfeitures. On January 1, 2023, two employees exercised the options. A)Show the journal entries for December 31, 2021, December 31, 2022, January 1, 2023 for ASPE and IFRS. If the entries are the same under ASPE and IFRS you can just state they are the same. The second financial instrument…
Nadal Company has 20 executives to whom it grants compensatory share options on January 1, 2019. At that time, it grants each executive the right to purchase 120 shares of its $5 par common stock at $40 per share after a 3-year service period. The value of each option is estimated to be $8.50 on the grant date. Based on its average employee turnover rate each year, Nadal expects that 2 executives will not vest in the plan. At the end of 2021, Nadal confirms that the actual turnover was the same as expected. On January 5, 2022, 5 executives exercise their options. Required: Prepare Nadal’s journal entries for 2019 through 2022 in regard to its compensatory share option plan.
On November 1, 2017, Windsor Company adopted a stock-option plan that granted options to key executives to purchase 19,000 shares of the company’s $10 par value common stock. The options were granted on January 2, 2018, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $40, and the fair value option-pricing model determines the total compensation expense to be $328,000. All of the options were exercised during the year 2020: 4,750 on January 3 when the market price was $67, and 14,250 on May 1 when the market price was $77 a share. Prepare journal entries relating to the stock option plan for the years 2018, 2019, and 2020. Assume that the employee performs services equally in 2018 and 2019. (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…
On March 1, 2022, Hudson Corp. purchased a put option on shares of ICA stock. The contract was for 100 shares at a strike price of $130 per share, with an expiration date of May 31, 2022. The option contract premium (the amount paid to enter the contract at signing) was $40. On March 31, a market appraisal estimated the time value of the option to be $30. Hudson settled the option contract on May 10. Prices of ICA stock during the option period are provided below. Price of ICA stocks March 1 $130 March 31 $120 May 10 $125 At what amount would Hudson report as the value of the put option in its March 31, 2022 balance sheet? Put Option account balance as of March 31, 2022 4,000
Nadal Company has 20 executives to whom it grants compensatory share options on January 1, 2019. At that time, it grants each executive the right to purchase 90 shares of its $5 par common stock at $41 per share after a 3-year service period. The value of each option is estimated to be $8.75 on the grant date. Based on its average employee turnover rate each year, Nadal expects that 2 executives will not vest in the plan. At the end of 2021, Nadal confirms that the actual turnover was the same as expected. On January 5, 2022, 3 executives exercise their options.Required: Prepare Nadal's journal entries for 2019 through 2022 in regard to its compensatory share option plan.
On January 1, 2021, M Company granted 95,000 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 $13. An option-pricing model estimates the fair value of the options to be $4 on the date of grant. What amount should M recognize as compensation expense for 2021? (Round your answer to the nearest dollar amount.)

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