On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. OnJanuary 1, 2024, 38 million stock options were granted, exercisable for 38 million shares of Martinez's $1 par common stock.• The options are exercisable between January 1, 2027, and December 31, 2029, at 80% of the quoted market price on January 1,2024, which was $10.• The fair value of the 38 million options, estimated by an appropriate option pricing model, is $3 per option.• Martinez chooses the option to recognize forfeitures only when they occur.Ten percent (3.8 million) of the options were forfeited when an executive resigned in 2025.• All other options were exercised on July 12, 2028, when the stock's price jumped unexpectedly to $36 per share.Required:1. When is Martinez's stock option measurement date?2. Determine the compensation expense for the stock option plan in 2024. (Ignore taxes.)3. Prepare the journal entries to reflect the effect of forfeiture of the stock options on Martinez's financial statements for 2025 and2026.5. Prepare the journal entry to account for the exercise of the options in 2028.

1. Martinez's stock option measurement dateThe measurement date for stock options is the date at…

Answered: On October 15, 2023, the board of…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 23P

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On January 1, 2019, Phoenix Corporation adopts a performance-based share option plan for 25 executives, with the number of shares based on the yearly increase in sales. At the end of 2019, based on a 10% increase in sales, it expects that each executive will be granted 150 options and that the fair value of an option expected to vest is 15.75. Phoenix expects a turnover rate of 15% over the 3-year service period. Determine the compensation expense for 2019 for this plan.
Anoka Company reported the following selected items in the shareholders equity section of its balance sheet on December 31, 2019, and 2020: In addition, it listed the following selected pretax items as a December 31, 2019 and 2020: The preferred shares were outstanding during all of 2019 and 2020; annual dividends were declared and paid in each year. During 2019, 2,000 common shares were sold for cash on October 4. During 2020, a 20% stock dividend was declared and issued in early May. At the end of 2019 and 2020, the common stock was selling for 25.75 and 32.20, respectively. The company is subject to a 30% income tax rate. Required: 1. Prepare the comparative 2019 and 2020 income statements (multiple-step), and the related note that would appear in Anokas 2020 annual report. 2. Next Level Compute the price/earnings ratio for 2020. How does this compare to 2019? Why is it different?
On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 32 million stock options were granted, exercisable for 32 million shares of Martinez's $1 par common stock. . • The options are exercisable between January 1, 2027, and December 31, 2029, at 80% of the quoted market price on January 1, 2024, which was $30. • The fair value of the 32 million options, estimated by an appropriate option pricing model, is $6 per option. • Martinez chooses the option to recognize forfeitures only when they occur. • Ten percent (3.2 million) of the options were forfeited when an executive resigned in 2025. ⚫ All other options were exercised on July 12, 2028, when the stock's price jumped unexpectedly to $34 per share. Required: 1. When is Martinez's stock option measurement date? 2. Determine the compensation expense for the stock option plan in 2024. (Ignore taxes.) 3. Prepare the journal entries to reflect the…
On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 24 million stock options were granted, exercisable for 24 million shares of Martinez's $1 par common stock. • The options are exercisable between January 1, 2027, and December 31, 2029, at 80% of the quoted market price on January 1, 2024, which was $15. • The fair value of the 24 million options, estimated by an appropriate option pricing model, is $5 per option. • Martinez chooses the option to recognize forfeitures only when they occur. . Ten percent (2.4 million) of the options were forfeited when an executive resigned in 2025. • All other options were exercised on July 12, 2028, when the stock's price jumped unexpectedly to $23 per share. Required: 1. When is Martinez's stock option measurement date? 2. Determine the compensation expense for the stock option plan in 2024. (Ignore taxes.) 3. Prepare the journal entries to reflect the…
On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 28 million stock options were granted, exercisable for 28 million shares of Martinez's $1 par common stock. The options are exercisable between January 1, 2027, and December 31, 2029, at 80% of the quoted market price on January 1, 2024, which was $15. The fair value of the 28 million options, estimated by an appropriate option pricing model, is $6 per option. Martinez chooses the option to recognize forfeltures only when they occur. Ten percent (28 million) of the options were forfelted when an executive resigned in 2025. All other options were exercised on July 12, 2028, when the stock's price jumped unexpectedly to $27 per share. Required: 1. When Is Martinez's stock option measurement date? 2. Determine the compensation expense for the stock option plan in 2024. (Ignore taxes.) 3. Prepare the journal entries to reflect the effect of…
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On October 15, 2020, the board of directors of ABC Corporation approved a stock option plan for key executives. On January 1, 2021, 20 million stock options were granted, exercisable for 20 million shares of Ensors $1 par common stock. The options are exercisable between January 1, 2024, and December 31, 2026, at 80% of the quoted market price on January 1, 2021, which was $ 15. The fair value of the 20 million options, estimated by an appropriate option pricing model, is $6 per option. Ensor chooses the option to recognize forfeitures only when they occur.Ten percent (2 million) of the options were forfeited when an executive resigned in 2022. All other options were exercised on July 12, 2025, when the stocks price jumped unexpectedly to $19 per share.Required:1. When is ABCs stock option measurement date?2. Determine the compensation expense for the stock option plan in 2021. (Ignore taxes.)3. Prepare the journal entries to reflect the effect of forfeiture of the stock options on…
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On October 15, 2020, the board of directors of Ensor Materials Corporation approved a share option plan for key executives. On January 1, 2021, 20 million share options were granted, exer- cisable for 20 million shares of Ensor's $1 par ordinary share. The options are exercisable between January 1, 2024, and December 31, 2026, at 80% of the quoted market price on January 1, 2021, which was $15. The fair value of the 20 million options, estimated by an appropriate option pricing model, is $6 per option. Two million options were forfeited when an executive resigned in 2022. All other options were exercised on July 12, 2025, when the share's price jumped unexpectedly to $19 per share. Required: 1. When is Ensor's share option measurement date? 2. Determine the compensation expense for the share option plan in 2021. (Ignore taxes.) 3. What is the effect of forfeiture of the share options on Ensor's financial statements for 2022 and 2023? 4. Is this effect consistent with the general…
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