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ACCT 4050 Study Guide - Midterm Guide: Valuation Of Options, Dividend, Preferred Stock

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tancrab18
22 Mar 2017
School
KSU
Department
Accounting
Course
ACCT 4050
Professor
Donald Ariail

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Document Summary

Acct 4050: intermediate financial acct ii chapters 18 & 19 exercises and answers: on january 1, 2016, m company granted 90,000 stock options to certain executives. Answer: ,000. (90,000 5 = ,000; ,000/3 yrs. = ,000: on january 1, 2016, m company granted 90,000 stock options to certain executives. The options are exercisable no sooner than december 31, 2018, and expire on january 1, 2022. Each option can be exercised to acquire one share of par common stock for . An option- pricing model estimates the fair value of the options to be on the date of grant. Answer: ,000. (90,000 5 = ,000; ,000 90% = ,000 2/3 = ,000; ,000 - 150,000 = ,000: on january 1, 2016, albacore company had 300,000 shares of its common stock issued and outstanding. Albacore issued a 10% stock dividend on july 1, 2016.

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Related Questions

On January 1, 2016, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2018, and expire on January 1, 2022. Each option can be exercised to acquire one share of $1 par common stock for $12. An option-pricing model estimates the fair value of the options to be $5 on the date of grant.

If unexpected turnover in 2017 caused the company to estimate that 10% of the options would be forfeited, what amount should M recognize as compensation expense for 2017?

$30,000.

$60,000.

$120,000.

$150,000.

Answer: (90,000 × 5 = $450,000; $450,000 × 90% = $405,000 × 2/3 = $270,000; $270,000 - 150,000 = $120,000

Please show how did they get 150,000?

On October 15, 2017, the board of directors of Ensor MaterialsCorporation approved a stock option plan for key executives. OnJanuary 1, 2018, 21 million stock options were granted, exercisablefor 21 million shares of Ensor's $1 par common stock. The optionsare exercisable between January 1, 2021, and December 31, 2023, at90% of the quoted market price on January 1, 2018, which was $10.The fair value of the 21 million options, estimated by anappropriate option pricing model, is $4 per option. Ensor choosesthe option to recognize forfeitures only when they occur.

Ten percent (2.1 million) of the options were forfeited when anexecutive resigned in 2019. All other options were exercised onJuly 12, 2022, when the stock’s price jumped unexpectedly to $20per share.

Required:
1. When is Ensor’s stock option measurementdate?
2. Determine the compensation expense for thestock option plan in 2018. (Ignore taxes.)
3. & 5. Prepare the necessary journalentries.:Record compensation expense on December 31, 2019.,Recordcompensation expense on December 31, 2020.,Record the exercise ofthe options in 2022.

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.