Pont Chemical Remediation Ltd. issued options in 20X6 allowing the holder to acquire 120,000 common shares in 4 years’ time at an acquisition price of $25 per share. Using an option pricing model, the options are valued at $288,000. The options were issued for consulting and promotion work done, tasks that are not easily valued.Required:1. Provide the journal entry to record the transaction. 2. Assume that the options were exercised when the market price of common shares is $45. Provide the entry for exercise. 3. Assume that the options were allowed to lapse when the price of common shares is $17. Provide the entry for the lapse.
Pont Chemical Remediation Ltd. issued options in 20X6 allowing the holder to acquire 120,000 common shares in 4 years’ time at an acquisition price of $25 per share. Using an option pricing model, the options are valued at $288,000. The options were issued for consulting and promotion work done, tasks that are not easily valued.Required:1. Provide the journal entry to record the transaction. 2. Assume that the options were exercised when the market price of common shares is $45. Provide the entry for exercise. 3. Assume that the options were allowed to lapse when the price of common shares is $17. Provide the entry for the lapse.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Pont Chemical Remediation Ltd. issued options in 20X6 allowing the holder to acquire 120,000 common shares in 4 years’ time at an acquisition price of $25 per share. Using an option pricing model, the options are valued at $288,000. The options were issued for consulting and promotion work done, tasks that are not easily valued.
Required:
1. Provide the
2. Assume that the options were exercised when the market price of common shares is $45. Provide the entry for exercise.
3. Assume that the options were allowed to lapse when the price of common shares is $17. Provide the entry for the lapse.
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