On November 1, 2020, DaBaby Company adopted a stock-option plan that granted options to key executives to purchase 42,500 shares of the company's $10 par value common stock. The options were granted on January 2, 2021 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 $30, and the fair value option-pricing model determines the total compensation expense to be $210,000. All of the options were exercised during the year 2023: 20,100 on January 15 when the market price was $48, and 22,400 on June 1 when the market price was $56 a share. Prepare journal entries relating to the stock option plan for the years 2021, 2022, and 2023. Assume that the employee performs services equally in 2022 and 2023.

On November 1, 2020, DaBaby Company adopted a stock-option plan that granted options to key executives to purchase 42,500 shares of the company's $10 par value common stock. The options were granted on January 2, 2021 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 $30, and the fair value option-pricing model determines the total compensation expense to be $210,000. All of the options were exercised during the year 2023: 20,100 on January 15 when the market price was $48, and 22,400 on June 1 when the market price was $56 a share. Prepare journal entries relating to the stock option plan for the years 2021, 2022, and 2023. Assume that the employee performs services equally in 2022 and 2023.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

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).
Pastore Incorporated granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $31 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $9.00 per option. What would be the total compensation indicated by these options?
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 January 1, 2021, Sarasota Inc. granted stock options to officers and key employees for the purchase of 23,000 shares of the company’s $10 par common stock at $27 per share. The options were exercisable within a 5-year period beginning January 1, 2023, by grantees still in the employ of the company, and expiring December 31, 2027. The service period for this award is 2 years. Assume that the fair value option-pricing model determines total compensation expense to be $359,400.On April 1, 2022, 2,300 options were terminated when the employees resigned from the company. The market price of the common stock was $35 per share on this date.On March 31, 2023, 13,800 options were exercised when the market price of the common stock was $41 per share.Prepare journal entries to record issuance of the stock options, termination of the stock options, exercise of the stock options, and charges to compensation expense, for the years ended December 31, 2021, 2022, and 2023. (Credit account titles…
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
Newmont Corp grants stock options to its top executives. On January 1, 2021, 24 million options were granted, each giving the executive owning them the right to acquire five $1 par common shares. The exercise price is the market price on the grant date – $30 per share ($120 per option). Options vest on January 1, 2025. They cannot be exercised before that date and will expire on December 31, 2027. The fair value of the 24 million options, estimated by an appropriate option pricing model, is $42 per option. Ignore income tax. Newmont's compensation expense in 2021 for these stock options was: (Round your answer to nearest whole dollar amount.) rev: 04_13_2020_QC_CS-207906 Multiple Choice $504 million. $1,008 million. $252 million. $0.
Modern Corporation granted 95,000 stock options to certain executives on January 1, 2022. The options are exercisable no sooner than December 31, 2024, and expire on January 1, 2028. Each option can be exercised to acquire one share of $1 par common stock for $11. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. How much compensation expense should Modern recognize in 2022 as a result of this stock option grant?