Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. & 3. Prepare the appropriate journal entries to record compensation expense on December 31, 2024, 2025, and 2026. Record the exercise of the options if all of the options are exercised on May 11, 2028, when the market price is $19 per share.
Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. & 3. Prepare the appropriate journal entries to record compensation expense on December 31, 2024, 2025, and 2026. Record the exercise of the options if all of the options are exercised on May 11, 2028, when the market price is $19 per share.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Vinubhai
Transcribed Image Text:SSG Cycles manufactures and distributes motorcycle parts and supplies. Employees are offered a variety of share-based
compensation plans. Under its nonqualified stock option plan, SSG granted options to key officers on January 1, 2024.
• The options permit holders to acquire 19 million of the company's $1 par common shares for $16 within the next six years, but not
before January 1, 2027 (the vesting date).
. The market price of the shares on the date of grant is $18 per share.
• The fair value of the 19 million options, estimated by an appropriate option pricing model, is $4.80 per option.
Required:
1. Determine the total compensation cost pertaining to the incentive stock option plan.
2. & 3. Prepare the appropriate journal entries to record compensation expense on December 31, 2024, 2025, and 2026. Record the
exercise of the options if all of the options are exercised on May 11, 2028, when the market price is $19 per share.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2 and 3
Determine the total compensation cost pertaining to the incentive stock option plan.
Note: Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).
Total compensation cost
million
Reg 2 and 3
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