Chapter 19, Problem 19.4E

a.

To determine

To prepare: The journal entries for recording of compensation expense over the vesting period.

Giveninformation:

Number of shares as an option is10,000.

Par value of common stock is $2.

Exercise price per share is $18.

Vesting time period is 2 years.

Estimated fair value at the grant date is $250,000 $\left(10,000\text{ shares}\times \$2.5\text{ per share}\right)$.

Initial vesting probability is 100%.

b.

To determine

To prepare: The journal entries forrecording of compensation expense over the vesting period.

Given information:

Number of shares as an option is 10,000

Par value of common stock is $2.

Exercise price per share is $18.

Vesting time period is 2 years.

Estimated fair value at the grant date is $250,000 $\left(10,000\text{ shares}\times \$2.5\text{ per share}\right)$.

Initial vesting probability of year 1 is 100%.

Vesting probability of year 2 is 60%.

c.

To determine

The journal entries related to recording of expiration of all options.

Given information:

Number of shares as an option is 10,000.

Par value of common stock is $2.

Exercise price per share is $18.

Vesting time period is 2 years.

Estimated fair value at the grant date is $250,000 $\left(10,000\text{ shares}\times \$2.5\text{ per share}\right)$.

Initial vesting probability of year 1 is 100%.

Vesting probability of year 2 is 60%.

d.

To determine

To prepare: The journal entries for recording of compensation expense over the vesting period.

Given information:

Number of shares as an option is 10,000

Par value of common stock is $2.

Exercise price per share is $18.

Vesting time period is 2 years.

Estimated fair value at the grant date is $250,000 $\left(10,000\text{ shares}\times \$2.5\text{ per share}\right)$.

Initial vesting probability of year 1 is 80%.

Vesting probability of year 2 is 80%.