On January 1, 2016, M Company granted 93,000 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 $4 on the date of grant. What amount should M recognize as compensation expense for 2016?
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- XYZ Company issued 99,000 stock options to key executives on January 1, 2021. The options must be exercised by December 31, 2023, and will expire on January 1, 2027. Each option entitles the holder to one share of $1 par ordinary stock for $12. On the date of award, an option-pricing model estimates the fair value of the options to be $4. What should XYZ deduct as compensation expense in 2021?Fortune Brands granted options on January 1, 2024, that allows the recipient to purchase 15.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2026 (the vesting date). The exercise price is the market price of the shares on the date of grant, $17 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives? Note: Round your answer to 1 decimal place. Multiple Choice O $60.0 million $90.0 million $0 $20.0 millionOn January 1, 2018, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2020, and expire on January 1, 2024. 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 2019 caused the company to estimate that 15% of the options would be forfeited, what amount should M recognize as compensation expense for 2019?
- Under its executive stock option plan, Sorensen Corporation granted options on January 1, 2024, that permit executives to purchase 31 million of the company's $1 par common shares within the next seven years, but not before December 31, 2026 (the vesting date). The exercise price is the market price of the shares on the date of grant, $19 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. The options expired in 2030 without being exercised. By what amount will Sorensen's shareholders' equity be increased as a result of having granted the options?On April 1, 2022, Wilson Corp. purchased a call option on shares of FVA stock. The contract was for 100 shares at a strike price of $110 per share, with an expiration date of June 30, 2022. The option contract premium (the amount paid to enter the contract at signing) was $50. Wilson settled the option on June 15, when a market appraisal estimated the time value of the option to be $30 (assume cash settlement). Prices of FVA stock during the option period are provided below. Price of FVA stock: April 1 $110 June 15 $115 June 30 $105 What amount of gain or loss on settlement is recorded in the journal entry to record the settlement of the option contract? (Loss amounts should be indicated with a minus sign.) Amount of Gain or (Loss) on Settlement: $ 1,500On April 1, 2022, Wilson Corp. purchased a call option on shares of FVA stock. The contract was for 100 shares at a strike price of $130 per share, with an expiration date of June 30, 2022. The option contract premium (the amount paid to enter the contract at signing) was $70. Wilson settled the option on June 15, when a market appraisal estimated the time value of the option to be $50 (assume cash settlement). Prices of FVA stock during the option period are provided below. June 15 June 30 $125 $135 Price of FVA stock: April 1 $130 What amount of gain or loss on settlement is recorded in the journal entry to record the settlement of the option contract? (Loss amounts should be indicated with a minus sign.)
- Please help meWalters Audio Visual, Inc. offers a stock option plan to its regional managers. On January 1, 2018, 40 millionoptions were granted for 40 million $1 par common shares. The exercise price is the market price on the grantdate, $8 per share. Options cannot be exercised prior to January 1, 2020, and expire December 31, 2024. The fairvalue of the options, estimated by an appropriate option pricing model, is $2 per option. Because the plan doesnot qualify as an incentive plan, Walters will receive a tax deduction upon exercise of the options equal to theexcess of the market price at exercise over the exercise price. The income tax rate is 40%.Required:1. Determine the total compensation cost pertaining to the stock option plan.2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31,2018.3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31,2019.4. Record the exercise of the options and…On August 15, 2019, Outkast Co. invested idle cash by purchasing a call option on Counting Crows Inc. common shares for $360. The notional value of the call option is 400 shares, and the option price is $40. The option expires on January 31, 2020. The following data are available with respect to the call option. Date Market Price of Counting Crows Shares Time Value of Call Option September 30, 2019 $48 per share $180 December 31, 2019 46 per share 65 January 15, 2020 47 per share 30 Instructions Prepare the journal entries for Outkast for the following dates. a. Investment in call option on Counting Crows shares on August 15, 2019. b. September 30, 2019—Outkast prepares financial statements. c. December 31, 2019—Outkast prepares financial statements. d. January 15, 2020—Outkast settles the call option on the Counting Crows shares.
- Under its executive stock option plan, ABC Corp. granted 30 million options on January 1, 2021, that permit executives to purchase 30 million of the company's $1 par common shares within the next six years, but not before December 31, 2023. • The exercise price is the market price of the shares on the date of grant, $30 per share. • The fair value of the options as of grant date, estimated by an appropriate option pricing model, is $2 per option. • Assume no forfeitures. Required: 1. Provide the journal entry for compensation expense on December 31, 2021. 2. Provide the journal entry for compensation expense on December 31, 2022. 3. Provide the journal entry for compensation expense on December 31, 2023. 4. Suppose that all 30 million options are exercised on April 3, 2024, when the market price is $35 per share. Provide the journal entry for exercise of the options. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter…Please do not give image formatUnder its executive stock option plan, Western Corporation granted options on January 1, 2021, that permit executives to purchase 26 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $20 per share. The fair value of the options, estimated by an appropriate option pricing model, is $6 per option. No forfeitures are anticipated. The options are exercised on April 2, 2024, when the market price is $23 per share. By what amount will Western's shareholder's equity be increased when the options are exercised?