INTERMEDIATE ACCOUNTING (LL) W/CONNECT
9th Edition
ISBN: 9781260679694
Author: SPICELAND
Publisher: MCG
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Chapter 19, Problem 19.6E
(1)
To determine
Stock options: Stock options are the stock-based compensation plans provided in the form of an option to buy certain number of shares for a certain price during certain period.
To determine: The compensation cost of stock options
(2)
To determine
To prepare:
(3)
To determine
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To journalize: The entry for compensation expense on December 31, 2018
(4)
To determine
To journalize: The entry for compensation expense on December 31, 2019
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Problem 19-1 (Algo) Stock options; forfeiture; exercise [LO19-2]
On October 15, 2020, the board of directors of Ensor Materials Corporation approved a stock option plan for key executives. On
January 1, 2021, 30 million stock options were granted, exercisable for 30 million shares of Ensor's $1 par common stock. The options
are exercisable between January 1, 2024, and December 31, 2026, at 80% of the quoted market price on January 1, 2021, which was
$15. The fair value of the 30 million options, estimated by an appropriate option pricing model, is $5 per option. Ensor chooses the
option to recognize forfeitures only when they occur.
Ten percent (3 million) of the options were forfeited when an executive resigned in 2022. All other options were exercised on July 12,
2025, when the stock's price jumped unexpectedly to $30 per share.
Required:
1. When is Ensor's stock option measurement date?
2. Determine the compensation expense for the stock option plan in 2021.…
L 30
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Chapter 19 Solutions
INTERMEDIATE ACCOUNTING (LL) W/CONNECT
Ch. 19 - Prob. 19.1QCh. 19 - Prob. 19.2QCh. 19 - The Tax Code differentiates between qualified...Ch. 19 - Stock option (and other share-based) plans often...Ch. 19 - What is a simple capital structure? How is EPS...Ch. 19 - Prob. 19.6QCh. 19 - Blake Distributors had 100,000 common shares...Ch. 19 - Why are preferred dividends deducted from net...Ch. 19 - Prob. 19.9QCh. 19 - The treasury stock method is used to incorporate...
Ch. 19 - The potentially dilutive effect of convertible...Ch. 19 - How is the potentially dilutive effect of...Ch. 19 - Prob. 19.13QCh. 19 - If stock options and restricted stock are...Ch. 19 - Wiseman Electronics has an agreement with certain...Ch. 19 - Prob. 19.16QCh. 19 - When the income statement includes discontinued...Ch. 19 - Prob. 19.18QCh. 19 - Prob. 19.19QCh. 19 - (Based on Appendix B) LTV Corporation grants SARs...Ch. 19 - Prob. 19.1BECh. 19 - Prob. 19.2BECh. 19 - Stock options LO192 Under its executive stock...Ch. 19 - Prob. 19.4BECh. 19 - Prob. 19.5BECh. 19 - Prob. 19.6BECh. 19 - Prob. 19.7BECh. 19 - Prob. 19.8BECh. 19 - Prob. 19.9BECh. 19 - Performance-based options LO192 Refer to the...Ch. 19 - Prob. 19.11BECh. 19 - Prob. 19.12BECh. 19 - EPS; nonconvertible preferred shares LO197 At...Ch. 19 - Prob. 19.14BECh. 19 - Prob. 19.15BECh. 19 - Prob. 19.16BECh. 19 - Prob. 19.1ECh. 19 - Prob. 19.2ECh. 19 - Prob. 19.3ECh. 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 - EPS; shares issued; stock dividend LO195, LO196...Ch. 19 - Prob. 19.13ECh. 19 - EPS; stock dividend; nonconvertible preferred...Ch. 19 - EPS; net loss; nonconvertible preferred stock;...Ch. 19 - EPS; stock dividend; nonconvertible preferred...Ch. 19 - Prob. 19.17ECh. 19 - EPS; stock dividend; nonconvertible preferred...Ch. 19 - EPS; stock dividend; nonconvertible preferred...Ch. 19 - EPS; shares issued; stock options LO196 through...Ch. 19 - EPS; convertible preferred stock; convertible...Ch. 19 - Prob. 19.22ECh. 19 - Prob. 19.23ECh. 19 - Prob. 19.24ECh. 19 - Prob. 19.25ECh. 19 - EPS; concepts; terminology LO195 through LO1913...Ch. 19 - FASB codification research LO192 The FASB...Ch. 19 - Prob. 19.28ECh. 19 - Prob. 19.29ECh. 19 - Prob. 19.30ECh. 19 - Restricted stock units; cash settlement Appendix...Ch. 19 - Stock options; forfeiture; exercise LO192 On...Ch. 19 - Stock options; graded vesting LO192 January 1,...Ch. 19 - Stock options; graded vesting; measurement using a...Ch. 19 - Stock options; graded vesting; IFRS LO192, LO1914...Ch. 19 - Prob. 19.5PCh. 19 - Prob. 19.6PCh. 19 - Prob. 19.7PCh. 19 - Prob. 19.8PCh. 19 - EPS from statement of retained earnings LO194...Ch. 19 - EPS from statement of shareholders equity LO194...Ch. 19 - EPS; non convertible preferred stock; treasury...Ch. 19 - EPS; non convertible preferred stock; treasury...Ch. 19 - EPS; non convertible preferred stock; treasury...Ch. 19 - EPS; convertible preferred stock; convertible...Ch. 19 - EPS; antidilution LO194 through LO1910, LO1913...Ch. 19 - EPS; convertible bonds; treasury shares LO194...Ch. 19 - Prob. 19.17PCh. 19 - Prob. 19.18PCh. 19 - EPS; options; restricted stock; additional...Ch. 19 - Prob. 19.1BYPCh. 19 - Communication Case 192 Stock options; basic...Ch. 19 - Prob. 19.3BYPCh. 19 - Real World Case 195 Share-based plans; Walmart ...Ch. 19 - Prob. 19.6BYPCh. 19 - Prob. 19.7BYPCh. 19 - Analysis Case 198 EPS concepts LO194 through...Ch. 19 - Prob. 19.9BYPCh. 19 - Prob. 19.10BYPCh. 19 - Communication Case 1911 Dilution LO199 I thought...Ch. 19 - Real World Case 1912 Reporting EPS; discontinued...Ch. 19 - Analysis Case 1913 Analyzing financial statements;...Ch. 19 - Analysis Case 1915 Kelloggs EPS; PE ratio;...Ch. 19 - Prob. 19.16BYPCh. 19 - Prob. 1CCTCCh. 19 - Air FranceKLM Case IFRS LO199 Air FranceKLM (AF),...
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- EXERCISE 3 The Red Fox Corporation granted 100 share options to each of its 200 employees on January 1,2020. The option plan entitles the employees to buy a share of the entity's P 200 par ordinary share capital at P 226 per share. Based on an option pricing model used by Red Fox, the fair value of the option on January 1,2020 was determined to be P32. The plan further provides that the employees should be in the service of the company until at least December 31,2022. The options are exercisable starting January 1,2023 and expire on December 31,2024. At January 1,2020, it was estimated that 15% of the employees who received the options will resign during the next three years. During 2020, 10 employees left the company. Át December 31,2020, 15 employees were expected to leave before December 31,2022. During 2021, 12 more employees left, and at the end of the year, it was expected that 5 more would resign before December 31,2022; although é employees left during 2022. Employees numbering…arrow_forwardNonearrow_forwardEXERCISE 4 On January 1, 2020, Cherry Red Company issued 10,000 share options for the purchase of P 100 par value ordinary share at a strike price of P 120 per share, to its key employees. The share options vest anytime once the share price reached P 200, up to December 31,2022. It is expected that the share price of the company would reach P 200 on December 31,2022. The options are exercisable until the end 2023. Based on the pricing model used by the company, the fair value of the share option on January 1,2020 is P 20. REQUIRED: a) Assume that the market price of the company's share reached P 200 in December 2021 and share options were exercised in 2022. Prepare entries for years 2020 through 2022. b.) Assume that the market price of the company's share reached P 200 in December 2022. Eighty percent of the options were exercised in 2023 and the remainder lapsed. Prepare entries for years 2020 through 2023. c.) How will the entries differ if the company's share reached a market price…arrow_forward
- 33arrow_forwardKindly show the explanationarrow_forwardExercise 19-2O (Algo) EPS; shares issued; stock options [LO19-6, 19-7, 19-8, 19-9] Stanley Department Stores reported net income of $776,000 for the year ended December 31, 2021. Additional Information: Common shares outstanding Incentive stock options (vested in 2020) outstanding throughout 2021 (Each option is exercisable for one common share at an exercise price of $23.00) During the year, the market price of Stanley's common stock averaged $27.60 per share. On Aug. 30, Stanley sold 15,000 common shares. Stanley's only debt consisted of $36, 000 of 10% short-term bank notes. The company's income tax rate is 25%. Jan. 1, 2021 90,000 24,000 Required: Compute Stanley's basic and diluted earnings per share for the year ended December 31, 2021. (Enter your answers in thousands. Do not round intermediate calculations) Numerator Denominator Earnings per Share Basic %3D Diluted %3Darrow_forward
- Question 3 On 6 July 2021, Falta Limited paid $300 to purchase a put option on Zebra Limited when the market price per ordinary shares was $120. The option gives Falta Limited to sell 500 shares at an exercise price of $120 and the option expires on 1 February 2022. Market price per share $ Time value of put Option $ Date 30 September 2021 31 December 2021 123 180 115 100 1 February 2022 112 30 Required: Prepare the journal entries for Falta for the following dates: (a) On 6 July 2021 to record the investment in the put option. (b) On 30 September 2021 when Falta Limited prepared the financial statements. (c) On 31 December 2021 when Falta Limited prepared the financial statements. (d) On 1 February 2022 when Falta Limited settled the call option.arrow_forwardQUESTION 19 On January 1, 2020, Korsak, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 120,000 SARS. Current market prices of the stock are as follows: January 1, 2020 December 31, 2020 December 31, 2021 December 31, 2022 $35 per share 38 per share 30 per share 33 per share Comperisation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2020. On December 31, 2022, 50,000 SARS are exercised by executives. What amount of compensation expense should Korsak recognize for the year ended December 31, 2022? $312,000 $780,000 $1,140,000 O $2,340,000arrow_forwardExercise 19-8 (Static) Stock options exercise; expirations [LO19-2] Martinez Audio Visual Incorporated offers an incentive stock option plan to its regional managers. On January 1, 2024, options were granted for 40 million $1 par common shares. • The exercise price is the market price on the grant date-$8 per share. • Options cannot be exercised prior to January 1, 2026, and expire December 31, 2030. • The fair value of the 40 million options, estimated by an appropriate option pricing model, is $1 per option. Required: 1. Determine the total compensation cost pertaining to the incentive stock option plan. 2. to 5. Prepare the appropriate journal entries to record compensation expense on December 31, 2024 and 2025. Prepare the appropriate journal entry to record the exercise of 75% of the options on March 12, 2026, when the market price is $9 per share and the entry on December 31, 2030, when the remaining options that have vested expire without being exercised.arrow_forward
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