On 1/1/2017 the stockholders adopted a stock option plan for topexecutives whereby each would receive right to purchase up to18,000 shares of common stock at $40 per share. The par value is$10 per share.
In January 2017 options were granted to each of five executivesto purchase 18000 shares (a total of 90000 options were issued- 5 x18000) The options were non-transferable, and the executives had toremain an employee of the company to exercise the option. It isassumed that the options were for services performed equally in2017 and 2018. The black-Scholes option pricing model determinestotal compensation expense to be 1900,000. The options vested on1/1/2019 and will expire on 1/1/2020.
A)Prepare journal entry required at the end of 2017 and2018 for stock options.
B)On 2/1/2019 four executives exercised their optionswhen the stock was trading for 48 per share. Executives chose notto exercise his options and let them expire.
On 1/1/2017 the stockholders adopted a stock option plan for topexecutives whereby each would receive right to purchase up to18,000 shares of common stock at $40 per share. The par value is$10 per share.
In January 2017 options were granted to each of five executivesto purchase 18000 shares (a total of 90000 options were issued- 5 x18000) The options were non-transferable, and the executives had toremain an employee of the company to exercise the option. It isassumed that the options were for services performed equally in2017 and 2018. The black-Scholes option pricing model determinestotal compensation expense to be 1900,000. The options vested on1/1/2019 and will expire on 1/1/2020.
A)Prepare journal entry required at the end of 2017 and2018 for stock options.
B)On 2/1/2019 four executives exercised their optionswhen the stock was trading for 48 per share. Executives chose notto exercise his options and let them expire.
Related questions
On October 15, 2015, the board of directors of Ensor MaterialsCorporation approved a stock option plan for key executives. OnJanuary 1, 2016, 38 million stock options were granted, exercisablefor 38 million shares of Ensor's $1 par common stock. The optionsare exercisable between January 1, 2019, and December 31, 2021, at80% of the quoted market price on January 1, 2016, which was $10.The fair value of the 38 million options, estimated by anappropriate option pricing model, is $3 per option.
3.8 million options were forfeited when an executive resigned in2017. All other options were exercised on July 12, 2020, when thestock's price jumped unexpectedly to $36 per share.
When is Ensorâs stock option measurement date?
| Determine the compensation expense for the stock option plan in2016. (Ignore taxes.) (Enter your answer in millions (i.e.,10,000,000 should be entered as 10).) Prepare the necessary journal entries. (If no entry isrequired for a transaction/event, select "No journal entryrequired" in the first account field. Enter your answers inmillions rounded to 1 decimal place (i.e., 5,500,000 should beentered as 5.5).) Record compensation expense on December 31, 2017. Record compensation expense on December 31, 2018. Record the exercise of the options in 2020. |
