The following events occurred at Charlotte Company surrounding stock options. Charlotte uses the fair value method of accounting for stock options. On 1/1/21 options were granted to each of four executives to purchase 5,000 shares (a total of 20,000 shares) of the company’s $2 par value common stock at a price of $25. The options were non-transferable and the executive had to remain an employee of the company through 12-31-22 to exercise the options. The options expire on 2/1/23. The Black-Scholes option pricing model determines the fair value of the options to be $1,350,000. On 4/5/22, one of the four executives resigned from the company. On 2/1/23, the remaining three executives exercised their options.
The following events occurred at Charlotte Company surrounding stock options. Charlotte uses the fair value method of accounting for stock options. On 1/1/21 options were granted to each of four executives to purchase 5,000 shares (a total of 20,000 shares) of the company’s $2 par value common stock at a price of $25. The options were non-transferable and the executive had to remain an employee of the company through 12-31-22 to exercise the options. The options expire on 2/1/23. The Black-Scholes option pricing model determines the fair value of the options to be $1,350,000. On 4/5/22, one of the four executives resigned from the company. On 2/1/23, the remaining three executives exercised their options.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- The following events occurred at Charlotte Company surrounding stock options. Charlotte uses the fair value method of accounting for stock options.
- On 1/1/21 options were granted to each of four executives to purchase 5,000 shares (a total of 20,000 shares) of the company’s $2 par value common stock at a price of $25. The options were non-transferable and the executive had to remain an employee of the company through 12-31-22 to exercise the options. The options expire on 2/1/23. The Black-Scholes option pricing model determines the fair value of the options to be $1,350,000.
- On 4/5/22, one of the four executives resigned from the company.
- On 2/1/23, the remaining three executives exercised their options.
Required:
Prepare any necessary entries for 1/1/21, 12/31/21, 4/5/22, 12/31/22 and 2/1/23. If no entry is necessary, indicate as such.
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