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On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 22 million stock options were granted, exercisable for 22 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 22 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 (2.2 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 $21 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 and 2026. 5. Prepare the journal entry to account for the exercise of the options in 2028.

On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 22 million stock options were granted, exercisable for 22 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 22 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 (2.2 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 $21 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 and 2026. 5. Prepare the journal entry to account for the exercise of the options in 2028.

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 October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 22 million stock options were granted, exercisable for 22 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 22 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 (2.2 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 $21 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 and 2026. 5. Prepare the journal entry to account for the exercise of the options in 2028.
Transcribed Image Text:On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 22 million stock options were granted, exercisable for 22 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 22 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 (2.2 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 $21 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 and 2026. 5. Prepare the journal entry to account for the exercise of the options in 2028.
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