value of the stock option is P90 if the exercise price is P180. If the exercise price isthe exercise price will be P180. On Jan. 1, 2018, the entity estimated that the fairPROBLEM 8-7On Jan. 1, 2018, TOMAS COMPANY granted 5,000 common stockoptions to the CEO, conditional upon the executive's remaining in theentity's employ until the end of 2020. The par value per share is P100 and theexercise price is P240.However, if earnings increase by at least 10% per year over the 3-year period,P240, the fair value of the stock option is P80.The carnings of the company increased over the 3-year period as follows:2018..10%2019..2020...11%. 3%REQUIRED:Compute the compensation expense for 2018, 2019, and 2020 as a result of thestock options.2. Prepare journal entries related to the stock options.PROBLEM 8-8On Jan. 1, 2018, JORGE COMPANY granted 20 stock options to eachof the 1,000 employees. Each grant is conditional upon the employee remainingin service for three (3) years. The fair value of the stock option on the date ofgrant is P120.On Dec. 31, 2018, 40 employees left the entity and 70 more are expectedto leave by the end of the vesting period. On Jan. 1, 2019, the company repricedthe stock options by lowering the exercise price. As a result, the fair value of thestock options increased by P40. The modification did not change thevesting period. On Dec. 31, 2019, 45 employees left the company and another60 are expected to leave by the end of the vesting period.On Dec. 31, 2020, 25 employees actually left the company.REQUIRED:1. Compute compensation expenses for 2018, 2019, and 2020.2. Prépare journal entries to recognize the compensation expense over the vestingperiod.

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Answered: REQUIRED: i Compute the compensation…

REQUIRED: i Compute the compensation expense for 2018, 2019, and 2020 as a result of the stock options. 2 Prepare journal entries related to the stock options.

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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