Ram grants to employees the option to buy shares of stock at $5 per share. A total of 100,000 shares are in the option grant. The service period is 3 years. The option pricing model sets the value of each option at $5.40 on the grant date while the stock market price on the grant date is $6.00. At the end of the first year, how much compensation expense should be recorded? (Lesson 13.2) 4 O a. $200,000 Ob. $180,000 O c. $500,000 O d. $540,000

Ram grants to employees the option to buy shares of stock at $5 per share. A total of 100,000 shares are in the option grant. The service period is 3 years. The option pricing model sets the value of each option at $5.40 on the grant date while the stock market price on the grant date is $6.00. At the end of the first year, how much compensation expense should be recorded? (Lesson 13.2) 4 O a. $200,000 Ob. $180,000 O c. $500,000 O d. $540,000

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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Jeffrey Thomas has been working at Gulf Oil for ten years. His performance has been good and he has received Gulf Oil stock options. Options vest at 20% a year. The stock options were distributed as below: 2019 - 3,000 options at $23.00 on Jan 1. 2020 - 2,500 options at $30.00 on Jan 1. 2021 - 5,000 options at $32.00 on Jan 1. The current price of Gulf Oil stock is $41.50. If Jeffrey were to leave the company today, how much money would he have from stock options?
Charles Wilson is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. Charles uses a 12% discount rate. Equipment purchase and installation Annual cash flow Equipment overhaul in year 6 Equipment overhaul in year 8 Click here to view the factor table. (a) Net present value Option 1 $70,700 $27,000 $ $4,820 Option 1 Option 2 Calculate the net present value of the two opportunities. (Round present value factor calculations to 4 decimal places, eg. 1.2514 and the final answers to 0 decimal places, e.g. 59,991.) $81,280 $29,330 $6.200 $ Option 2
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LUse the following information for the next four questions: 2. On the basis of a weighted average probability, SUFFUSE Co. x 20% = 20 employees) will leave during the three-year period years. SUFFUSE estimates that the fair value of each share optivon options to each of its 100 key employees conditional upon each On January 1, 20x1, SUFFUSE TO FILL Co. grants 1,000 shate Fact pattern: 1. On grant date, SUFFUSE estimates that no employees wil employee remaining in SUFFUSE's employ over the next three During the three-year period, no employees have actually let 1. On grant date, SUFFUSE estimates that no emploves leave the company during the three-year service During the three-year period, no employees have actually the company. Provide all the necessary joumal entries. estimates on January 1, 20x1 that 20 per cent of employees (100 and therefore forfeit their rights to the share options. Twenty (20) employees actually left the company during the three year period. Fifteen (15) employees…