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Brack Corporation grants a nonqualified stock option to , an employee, on January 1, , that entitled to acquire shares of stock at per share. On this date, the stock has a FMV and the option has a readily ascertainable FMV of per share. exercises the option on January 1, (when the FMV of the stock is ), and acquires shares of the stock for per share. later sells the stock on January 1, , for per share. a. What are the tax consequences to and Corporation on the following dates: January 1, ; January 1, ; and January 1, ? b. How would your answer to Part a change if the stock were instead closely-held and the option had no readily ascertainable FMV?
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- On April 5, 2017, Gustavo was granted an NQSO for 200 shares of common stock at 50 per share. On the date of the grant, there was no readily ascertainable fair market value for the option. Gustavo exercised the options on March 31, 2018, when the stock was selling for 60 per share. He sold the shares on December 1, 2019, for 75 per share. a. What amount and type of income, if any, will Gustavo have on the exercise date? b. What amount and type of income, if any, will Gustavo have on the date of the sale?Cordero Corporation has an employee stock-purchase planwhich permits all full-time employees to purchase 10 sharesof common stock on the third anniversary of their employmentand an additional 15 shares on each subsequent anniversarydate. The purchase price is set at the market price onthe date purchased and no commission is charged. Discusswhether this plan would be considered compensatory.On July 1, 2019, Lee Kwang Soo (LKS) Company issued rights to shareholders to subscribe to additional ordinary shares. One right was issued for each share owned. A shareholder could purchase one additional share for ten rights plus P60 cash. The rights expire on September 30, 2019. On July 1, 2019 the market price of a share with the right attached was P160 while the market price of one right alone was P8. Star Company’s shareholder’s equity on June 30, 2019 comprise the following:Ordinary share capital, P100 par (4,000 shares issued and outstanding) P400,000Share premium 240,000Accumulated profits 320,000Assuming on July 31, 2019, 2,500 share rights were exercised, by what amount would LKS company’s total shareholder equity increase as a result of the exercise of share…
- Question: On February 1 of year 0, John received a nonqualified stock option to purchase 100 shares of his ... On February 1 of year 0, John received a nonqualified stock option to purchase 100 shares of his employer’s stock for $10 per share. At the time John received the option, it was selling for $5 per share on an established exchange. On September 1 of year 1, John exercised the options when the stock was selling for $19 per share. On December 1 of year 2, John sold all of the shares for $30 per share. What is the amount and character of income that John must report in year 2?On January 1, 2024, J. Golden Corporation granted an employee an option to purchase 8,500 shares of J. Golden's $3 par common stock at $20 per share. The options became exercisable on December 31, 2025, after the employee completed two years of service. The option was exercised on January 10, 2026. The market prices of J. Golden's stock were as follows: January 1, 2024, $31; December 31, 2025, $53; and January 10, 2026, $46. An option pricing model estimated the value of the options at $8 each on the grant date. For 2024, J. Golden should recognize compensation expense of:On July 1, 2019, Isaiah Company issued rights to shareholders to subscribe to additional ordinary shares. One right was issued for each share owned. A shareholder could purchase one additional share for ten rights plus P60 cash. The rights expire on September 30, 2019. On July 1, 2019 the market price of a share with the right attached was P160 while the market price of one right alone was P8. Jakob Company’s shareholder’s equity on June 30, 2019 comprise the following:Ordinary share capital, P100 par (4,000 shares issued and outstanding) P400,000Share premium 240,000Accumulated profits 320,000Assuming on July 31, 2019, 2,500 share rights were exercised, by what amount would Isaiah company’s total shareholder equity increase as a result of the exercise of share rights?
- On January 1, 2019, an entity granted 10,000 share options to employees. The share optionsvest at December 31, 2020 provided the employees remain in service until then.The fair value of the share option cannot be estimated reliably. The par value per ordinaryshare is P100.The option price is P125 and the market value of the ordinary share is also P125 at the dateof grant. All share options vested on December 31, 2020 and no employees left the entity.The share options can be exercised starting January 1, 2021 and expire two years after. Allshare options are exercised on December 31, 2021. The share market prices are P150 onDecember 31, 2019, P180 on December 31, 2020 and P200 on December 31, 2021.Required:A. Prepare journal entries from 2019 to 2021On January 1,2019, an entity granted 15,000 share options to its employees. The share options will vest at the end of three years provided the employees remain in the service. The option price is P 60 and the entity's share price on the date of grant is also P 60. The par value of each share is P 50. At the date of grant, the entity concluded that fair value of the share options cannot be reliably determined. The options can be exercised within 3 years from the vesting date.All share options vested at the end of three years and no employees left during the three-years and no employees left during the three-years vesting period. The share prices and the number of share options exercised at year end are as follows: Share price Options exercised2019 P 63 2020 662021 762022 88 5,0002023 100 7,5002024 90 2,500What is the amount of compensation expense…On July 1, 20X1, Amos Corporation granted nontransferable, nonqualified stock options to certain key employees as additional compensation. The options permit the purchase of 20,000 shares of Amos’s $1 par common stock at a price of $32 per share. On the grant date, the stock’s market value was $32 per share. The options were exercisable beginning July 1, 20X5, and expire on July 1, 20X9. On February 3, 20X7, when the stock was selling for $53 per share, all options were exercised. Amos's tax rate is 21%. Amos has a December 31 year-end for financial reporting purposes. Required: How much compensation expense should Amos record in 20X1 and 20X2 if the options are worth $15 per share on the grant date? Compute the tax benefit that Amos will receive in 20X7 when the employees exercise the options.
- 2. On January 1, 2019, an entity granted 60,000 share options to employees. The share options vest at the end of three years provide the employees remain in service until then. The option price is P60 and the par value is P50. At the date of grant, the entity concluded that the fair value of the share options cannot be measured reliably. The share options can be exercised within one year after vesting. The share prices are P62 on December 31, 2019, P66 on December 31, 2020, P75 on December 31, 2021 and P85 on December 31, 2022. All options were exercised on December 31, 2022. • What is the compensation expense for 2021? 3. An entity began operations January 1, 2015 and reported the following net income or loss for five years of operations. 2015 P1 500 000 Loss 2016 1 300 000 Loss 2017 1 200 000 Loss 2018 4 500 000 Income 2019 9 000 000 Income On December 31, 2019, the capital accounts were: Preference share capital, P1002. ABC Corporation (a public company) establishes an employee stock option plan on January 1, year 1. The plan allows its employees to acquire 10,000 shares of its P1 par value common stock at P52 per share, when the market price is also P52. The options may not be exercised until five years from the grant date. The grant-date fair value of an option with similar terms and conditions is P8.62. Compensation expense at the end of year 1 is Answer:On January 1, 2020, Easy Company granted 30,000 share options to employees. The share options will vest at the end of three years provided the employees remain in service until then. The option price is P60 and the entity's share price is also P60 at the date of grant. The par value of the share is P50. At the date of grant, the entity concluded that the fair value of the share options cannot be estimated reliably. The share options have a life of 6 years. This means that the options can be exercised within three years after vesting. All share options vested at the end of three years and no employees left during the three- year period. The share prices and the number of share options exercised are set out below. Share Price Share options exercised at year-end 2020 63 2021 66 2022 75 2023 88 10,000 2024 100…
