INTERMEDIATE ACCT.-MYLAB COMBO ACCESS
3rd Edition
ISBN: 9780137391707
Author: GORDON
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 19, Problem 19.5BE
To determine
The treatment of exercising the stock option plan by theemployee and journal entries to record it.
Giveninformation:
Number of shares given as an option is 5,000
Par value of common stock is $1.
Fair value of shares at grant date is $100,000.
Exercise price per option is $8 each.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Rich Drennen’s personal statement of financial condition at December 31, 20X6, shows net worth of $400,000 before consideration of employee stock options owned on that date. Information relating to the stock options is as follows:
Options are to purchase 10,000 shares of Oglesby Corporation stock.
Options’ exercise price is $10 a share.
Options expire on June 30, 20X7.
Market price of the stock is $25 a share on December 31, 20X6.
The exercise of the options in 20X7 would result in ordinary income taxable at 35 percent.
After giving effect to the stock options, Drennen’s net worth at December 31, 20X6, would be
Marie Drugs offered an incentive stock option plan to its employees. On January 1, 2015, options were granted for sixty thousand $0.2 par common shares. The
exercise price, $5, equals the market price of the common stock on the grant date. The options cannot be exercised before January 1, 2018, and expire December 31,
2021. Each option has a fair value of $1 based on an option pricing model. Which is the correct entry to record compensation expense for the year 2015?
bha
Chapter 19 Solutions
INTERMEDIATE ACCT.-MYLAB COMBO ACCESS
Ch. 19 - What is the allocation period used to expense...Ch. 19 - How do companies account for stock-based...Ch. 19 - Do companies with equity-based compensation plans...Ch. 19 - When accounting for employee stock options, will a...Ch. 19 - Prob. 19.5QCh. 19 - Prob. 19.6QCh. 19 - Prob. 19.7QCh. 19 - Prob. 19.8QCh. 19 - Prob. 19.9QCh. 19 - Prob. 19.10Q
Ch. 19 - Prob. 19.1MCCh. 19 - Prob. 19.2MCCh. 19 - Prob. 19.3MCCh. 19 - Prob. 19.4MCCh. 19 - Prob. 19.5MCCh. 19 - Prob. 19.6MCCh. 19 - Prob. 19.7MCCh. 19 - Prob. 19.8MCCh. 19 - Prob. 19.1BECh. 19 - Prob. 19.2BECh. 19 - Prob. 19.3BECh. 19 - Prob. 19.4BECh. 19 - Prob. 19.5BECh. 19 - Prob. 19.6BECh. 19 - Employee Stock Options, Liability-Classified...Ch. 19 - Prob. 19.8BECh. 19 - Prob. 19.9BECh. 19 - Prob. 19.10BECh. 19 - Prob. 19.11BECh. 19 - Prob. 19.12BECh. 19 - Prob. 19.13BECh. 19 - Prob. 19.14BECh. 19 - Prob. 19.15BECh. 19 - Prob. 19.16BECh. 19 - Prob. 19.17BECh. 19 - Prob. 19.18BECh. 19 - Prob. 19.19BECh. 19 - Prob. 19.20BECh. 19 - Prob. 19.21BECh. 19 - Prob. 19.22BECh. 19 - Prob. 19.23BECh. 19 - Prob. 19.24BECh. 19 - Prob. 19.25BECh. 19 - Prob. 19.26BECh. 19 - Prob. 19.27BECh. 19 - Prob. 19.28BECh. 19 - Prob. 19.1ECh. 19 - Prob. 19.2ECh. 19 - Employee Stock Options. Equity-Classified Awards....Ch. 19 - Prob. 19.4ECh. 19 - Prob. 19.5ECh. 19 - Prob. 19.6ECh. 19 - Prob. 19.7ECh. 19 - Prob. 19.8ECh. 19 - Prob. 19.9ECh. 19 - Prob. 19.10ECh. 19 - Prob. 19.11ECh. 19 - Prob. 19.12ECh. 19 - Prob. 19.13ECh. 19 - Prob. 19.14ECh. 19 - Prob. 19.15ECh. 19 - Prob. 19.16ECh. 19 - Prob. 19.1PCh. 19 - Prob. 19.2PCh. 19 - Prob. 19.3PCh. 19 - Prob. 19.4PCh. 19 - Prob. 19.5PCh. 19 - Prob. 19.6PCh. 19 - Prob. 19.7PCh. 19 - Prob. 19.8PCh. 19 - Prob. 19.9PCh. 19 - Prob. 19.10PCh. 19 - Prob. 19.11PCh. 19 - Prob. 19.12PCh. 19 - Prob. 1JCCh. 19 - Prob. 2FSCCh. 19 - Prob. 1SSCCh. 19 - Prob. 2SSCCh. 19 - Basis for Conclusions Case 1: Are Employee Stock...Ch. 19 - Prob. 2BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Prepare journal entries relating to the stock option plan on the following dates using the fair value method. If no entry is needed, write "No Entry Necessary." Show your work for partial credits. On November 1, 2019, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 30,000 shares of common stock at $40 per share. The par value is $10 per share. On January 1, 2020, options were granted to each of five executives to purchase 30,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. It is assumed that the options were for services performed equally in 2020 and 2021. The Black-Scholes option pricing model determines total compensation expense to be $3,200,000. At February 1, 2022, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited on January 1, 2028arrow_forwardAllied Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 100,000 options were granted for 100,000 $10 par common shares. The exercise price equals the $25 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $15 based upon an option pricing model. At the end of the first year, it is expected that 100% of employees will exercise the options. By the end of Year 2, it is expected that only 80% of the options will be exercised. Allied chooses to adjust the fair value of options for the estimated forfeitures. What are the journal entries to reflect the first year and second years' compensation expense? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.)arrow_forwardOn January 1 of Year 1, Holiday Inc. offered a stock option incentive plan to a top executive. The plan provided the executive 300 stock options for Holiday Inc. $1 par value, common stock at an option price of $15 per share through the expiration date of January 1 of Year 7. The fair value of the options based upon an option-pricing model on January 1 of Year 1, is $9,000. The market price at year-end of Holiday Inc. stock is $15 per share on January 1 of Year 1, and $18 on December 31 of Year 1. The requisite service period is 3 years. The options were not exercised due to the stock price remaining below $15 per share after the vesting period. Record the entry on January 1 of Year 7 for the expiration of the stock options. Note: If a line in a journal entry isn't required for the transaction, select "N/A—debit" and "N/A—credit" as the account names and leave the Dr. and Cr. answers blank (zero).arrow_forward
- LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2018. Theoptions entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement ofspecific financial goals over the next four years. Attainment of these goals is considered probable initially andthroughout the service period. The options have a current fair value of $12 per option.Required:1. Prepare the appropriate entry when the options are awarded on January 1, 2018.2. Prepare the appropriate entries on December 31 of each year 2018–2021.3. Suppose at the beginning of 2020, LCI decided it is not probable that the performance objectives will be met.Prepare the appropriate entries on December 31 of 2020 and 2021.arrow_forwardOn January 1, 2020, The Akira Corporation granted stock options to one of its employees. The options allow the employee to purchase 10,000 common Akira shares with par value of $ 5 to $ 20 each. On the grant date, the Black-Scholes option pricing model indicated that the fair value of the options was $ 220,000. The options can be exercised beginning on January 1, 2022, after the employee has provided two years of service to the company. Assuming that the company closes books on December 31 of each year, what impact does the adjustment transaction at 12/31/20 related to this event have on the Net income (presented in the Statement of Income and Expenses) Total Equity of the Shareholders (after closing) Select one: to. Decrease of $ 220,000 Zero b. Decrease of $ 110,000 Decrease of $ 110,000 c. $ 110,000 increase Decrease of $ 110,000 d. Decrease of $ 110,000 Zeroarrow_forwardAccounting for Stock Options On April 1 of Year 1, Badger Corp. announced a stock option incentive plan for its top executives. The plan provides certain executives stock options for the company's common stock. Each option allows for the purchase of one share of common stock, par $1, at a standard option price of $25 per share. The rights are nontransferable and are exercisable three years after the grant date and prior to five years from the grant date. Continuing employment is required through the exercise date, and the requisite service period ends on the first possible exercise date. On April 1 of Year 1, 4,000 options were granted to employees when the market price was $30 per share. Using an option-pricing model, the fair value of the options granted was $36,000. Employees exercised 2,400 options on June 30 of Year 4, when the market price of the stock was $45 per share. . a. Compute the total amount of compensation cost for the grant made on April 1 of Year 1. $ 36,000 ✔ b.…arrow_forward
- Bhaarrow_forwardLCI Cable Company grants 1 million performance stock options to key executives at January 1, 2016. The options entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement of specific financial goals over the next four years. Attainment of these goals is considered probable initially and throughout the service period. The options have a current fair value of $12 per option. Required: 1. Prepare the appropriate entry when the options are awarded on January 1, 2016. 2. Prepare the appropriate entries on December 31 of each year 2016–2019. 3. Suppose at the beginning of 2018, LCI decided it is not probable that the performance objectives will be met. Prepare the appropriate entries on December 31 of 2018 and 2019.arrow_forwardPlease help mearrow_forward
- Darlington Inc., permits any of its employees to buy shares directly from the company. There are no brokerage fees and shares can be purchased at a 10% discount. During May, employees purchased 14,000 shares at a time when the market price of the shares was $10 per share.Prepare the appropriate journal entry for the May purchase. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)arrow_forwardFinger Limousine Services granted 5,100 options to acquire 5,100 shares of its $2 par value common stock. At the grant date, the fair value of the options is $130,000 and the exercise price per option is $5 each. Prepare the necessary journal entry assuming that all the options granted by Finger expired and were not exercised by any of the company's employees. (Record debits first, then credits. Exclude explanations from any journal entries.) Аcсount Expiration datearrow_forwardPlease answer competelyarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning