Recording Stock Options: Issuance and ExerciseIn October 2019, Meno Corp. announced a stock option incentive plan for its top executives. The plan provideseach executive 6,000 stock options for Meno's common stock, $1 par, at an exercise price of $36 per sharereduced by the percentage increase in EPS from December 31, 2019, to December 31, 2021. The rights arenontransferable and are exercisable three years after the grant date and prior to five years from the grant date.Continuing employment is required through exercise date, and the requisite service period ends on the firstpossible exercise date.On January 1, 2020, Martha Smith was granted 3,000 options when the market price was $30 per share. Using anoption-pricing model, the fair value of the options granted to Smith was valued at $9 per option. On December31, 2020, Meno's management believed that Smith would exercise her options at the first exercise date. ByDecember 31, 2021, Meno's EPS had increased by 20%.Smith exercised her options on December 31, 2022, when the market price of the stock was $60 per share.a. Compute the total amount of compensation cost for the grant made to Smith.$0xb. What entry should be made on the date of the grant?c. What entry should be made on December 31, 2020?d. Provide the entry to record the exercise of the options held by Smith on December 31, 2022.• Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr.and Cr. answers blank (zero).• Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) inalphabetical order.Dateb.C.d.Jan. 1, 2020N/AN/ADec. 31, 2020 Compensation ExpenseChackAccount NameDec. 31, 2022 CashPaid-in Capital-Stock Options✓# ✓✓÷ ✓✓÷ ✓Paid-in Capital in Excess of Par-Common Stock #0000Paid-in Capital-Stock OptionsCommon Stock+÷Dr.0✓0✓0x0✔0xox0✔0✓Cr.0✓0✓0x0✓0✔0x0x

The employee stock option plan is one of the incentive plans of the company for its employees in…

Smith exercised her options on December 31, 2022, when the market price of the stock was $60 per share. a. Compute the total amount of compensation cost for the grant made to Smith. $0 x b. What entry should be made on the date of the grant? c. What entry should be made on December 31, 2020? d. Provide the entry to record the exercise of the options held by Smith on December 31, 2022. • Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). • Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order. Date b. C. d. Jan. 1, 2020 N/A N/A Dec. 31, 2020 Compensation Expense Chocke Account Name Dec. 31, 2022 Cash Paid-in Capital-Stock Options ÷ + ✓ + ✓ ÷ → Paid-in Capital-Stock Options Common Stock Paid-in Capital in Excess of Par-Common Stock # V ✓ Dr. 0✓ 0✓ 0x 0 0x 0x 0✔ 0✓ Cr. 0 0✓ 0✓ 0x 0✓ 0✓ 0x 0x

Smith exercised her options on December 31, 2022, when the market price of the stock was $60 per share. a. Compute the total amount of compensation cost for the grant made to Smith. $0 x b. What entry should be made on the date of the grant? c. What entry should be made on December 31, 2020? d. Provide the entry to record the exercise of the options held by Smith on December 31, 2022. • Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). • Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order. Date b. C. d. Jan. 1, 2020 N/A N/A Dec. 31, 2020 Compensation Expense Chocke Account Name Dec. 31, 2022 Cash Paid-in Capital-Stock Options ÷ + ✓ + ✓ ÷ → Paid-in Capital-Stock Options Common Stock Paid-in Capital in Excess of Par-Common Stock # V ✓ Dr. 0✓ 0✓ 0x 0 0x 0x 0✔ 0✓ Cr. 0 0✓ 0✓ 0x 0✓ 0✓ 0x 0x

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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Subject: acounting
Answer the following question showing all calculations.
Kim holds an executive position at Taylors and Taylors, Incorporated. Her compensation package includes incentive stock options. She was granted 100 ISOs on October 1, XX01, when the stock was selling for $62 per share. The exercise pri of the options is $75 per share. Kim has to wait until January 1, XX02 to exercise h options. The options expire on September 30, XX03. Kim exercised her options on August 27, XX03 when the stock was selling for $107 per share. She sold her 100 shares on March 5, XX04 for $118 per share. Calculate and characterize the gain K must recognize from the March 5, XX04 sale. A) $0 B) $4,300 long-term capital gain C) $3,200 ordinary income; $1,100 short-term capital gain D) $1,300 ordinary income; $4,300 short-term capital gain
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Arnold exercised an incentive stock option in 2019, acquiring 1,500 shares of stock at an option price of $80 per share. The FMV of the stock at the date of exercise was $110 per share. In 2021, the rights became freely transferable and were not subject to a substantial risk of forfeiture. Arnold sells the shares in 2022 for $165 per share. Required: How do these transactions affect his AMTI in 2019, 2021, and 2022? Note: Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.
Now assume that the market price of Amazon stock on the grant date was $47 per share. Prepare the journal entries for the first year of the plan assuming that, rather than options, 710 shares of restricted stock were granted at the beginning of 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit >
Maren received 11 NQOs (each option gives her the right to purchase 11 shares of stock for $9 per share) at the time she started working when the stock price was $7 per share. When the share price was $16 per share, she exercised all of her options. Eighteen months later she sold all of the shares for $21 per share in 2023. How much gain will Maren recognize on the sale of the shares? (Do not use dollar sign or other punctuation.)
You are assistant controller of Stamos & Company, a medium-size manufacturer of machine parts. On October 22, 2015, the board of directors approved a stock option plan for key executives. On January 1, 2016, a specific number of stock options were granted. The options were exercisable between January 1, 2018, and December 31, 2022, at 100% of the quoted market price at the grant date. The service period is for 2016 through 2018. Your boss, the controller, is one of the executives to receive options. Neither he nor you have had occasion to deal with GAAP on accounting for stock options. He and you are aware of the traditional approach your company used years ago but do not know the newer method. Your boss understands how options might benefit him personally but wants to be aware also of how the options will be reported in the financial statements. He has asked you for a one-page synopsis of accounting for stock options under the fair value approach. He instructed you, “I don’t care…