PROBLEM 33-12 On January 1, 2018, Josh Company granted share options to 10 of its key employees entitling them to acquire P100 par value shares of the company at P110 per share. The share options will vest on December 31, 2020, provided that the employees remain in the company's employ and provided that revenues reach P100 million, the employees will receive 1,000 options each. If revenues reach P150 million, the employees will receive 2,000 options each. If revenues reach P200 million the employees will receive 3,000 options each. The market value of the option on the date of grant is P30. The company has a steady pattern of 25% increase in revenues every year over the last 5 years and expects the same pattern during the vesting period. In addition, the following information were deemed relevant for the computation of the Salaries expense for each year: Estimated number of Employees who will leave the Actual revenue earned Date company Dec. 31, 2018 2 P80 million Dec. 31, 2019 120 million Dec. 31, 2020 3* 200 million *Actual number of employees who left the company. Questions: How much is the salaries expense to be recognized in 2018? P80,000 P100 000 c. P180,000 300 000 2.

PROBLEM 33-12 On January 1, 2018, Josh Company granted share options to 10 of its key employees entitling them to acquire P100 par value shares of the company at P110 per share. The share options will vest on December 31, 2020, provided that the employees remain in the company's employ and provided that revenues reach P100 million, the employees will receive 1,000 options each. If revenues reach P150 million, the employees will receive 2,000 options each. If revenues reach P200 million the employees will receive 3,000 options each. The market value of the option on the date of grant is P30. The company has a steady pattern of 25% increase in revenues every year over the last 5 years and expects the same pattern during the vesting period. In addition, the following information were deemed relevant for the computation of the Salaries expense for each year: Estimated number of Employees who will leave the Actual revenue earned Date company Dec. 31, 2018 2 P80 million Dec. 31, 2019 120 million Dec. 31, 2020 3* 200 million *Actual number of employees who left the company. Questions: How much is the salaries expense to be recognized in 2018? P80,000 P100 000 c. P180,000 300 000 2.

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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Knowledge Check 01 At January 1, Year 1, AMC Company grants 10,000 options that permit key executives to acquire 10,000 of the company’s $1 par common shares within the next five years, but not before December 31, Year 3 (the vesting date). The exercise price is the market price of the shares on the date of grant, $20 per share. The fair value of the options is $4 per option. Eighty percent of the options (or 8,000) are exercised on January 5, Year 4 when the market price is $30 per share. The remaining 20% of the options expire as unexercised when the market price is $18 per share. Prepare the appropriate journal entry for the expiration of the unexercised options.
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Problem 16-03 Novak Company adopted a stock-option plan on November 30, 2019, that provided that 74,400 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $10 a share. The market price was $12 a share on November 30, 2020.On January 2, 2020, options to purchase 29,800 shares were granted to president Tom Winter—14,200 for services to be rendered in 2020 and 15,600 for services to be rendered in 2021. Also on that date, options to purchase 16,600 shares were granted to vice president Michelle Bennett—8,300 for services to be rendered in 2020 and 8,300 for services to be rendered in 2021. The market price of the stock was $15 a share on January 2, 2020. The options were exercisable for a period of one year following the year in which the services were rendered. The fair value of the options on the grant date was $4 per option.In 2021, neither the president nor the vice president exercised their options because…
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Problem 4 On December 29, 2018, Blue Company was registered at the Securities and Exchange Commission with 100,00 authorized shares of P100 par value. The following were Blue's transactions: December 29, 2018 May 14, 2019 August 9, 2019 December 31, 2019 Issued 40,000 shares at P105 per share. Purchased 600 of its ordinary shares at P110 per share. 400 treasury shares were resold at P95 per share. Profit for 2019 is P830,000. Dividends paid P200,000. 34. What is the total outstanding shares? 35. What is the balance of treasury shares? 36. How many shares are entitled to receive dividends? 37. What is the total shareholders' equity? Problem 5 Partners A & B have capital balances of P600,000 and P400,000 and share profits and losses in the ratio of 3:2, respectively, before the admission of C. With the consent of B, A sells one-half of his equity to C, with C paying A the amount of P350,000. 38. What is A's capital balance after the admission of C? 39. What is the total partnership…
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PROBLEM 5 At the beginning of Year 1, an entity grants 15,000 share options with a ten-year life to each of ten senior executives. The share options will vest and become exercisable immediately if and when the entity’s share price increases from P50 to P70, provided that the executives remains in service until the share price target is achieved.The entity applies a binomial option pricing model, which takes into account the possibility that the target will be achieved during the ten-year life of the options and the possibility that the target will not be achieved. The entity estimates that the fair value of the share options at grant date is P25 per option. From the option pricing model, the entity determines that the mode of the distribution of possible vesting date is five years. In other words, of all the possible outcomes, the most likely outcome of the market condition is that the share price target will be achieved at the end of Year 5. Therefore, the entity estimates that the…
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