On July 1, 2020, Paulina, Inc. granted share options to executives, which options allow them to purchase 20,000 ordinary shares at 25 per share. The options will vest provided that the executives will be employed in the company for the next two years. The options can be exercised for a one-year period starting July 1, 2022. By end of 2020, the market price of Paulina’s ordinary share as P33 per share. The fair value of the options cannot be reliably determined. All executives are expected to remain in the company for the whole vesting period. How much should Paulina charge to compensation expense for the year ended December 31, 2020? a. P0 b. P40,000 c. P80,000 d. P160,000

On July 1, 2020, Paulina, Inc. granted share options to executives, which options allow them to purchase 20,000 ordinary shares at 25 per share. The options will vest provided that the executives will be employed in the company for the next two years. The options can be exercised for a one-year period starting July 1, 2022. By end of 2020, the market price of Paulina’s ordinary share as P33 per share. The fair value of the options cannot be reliably determined. All executives are expected to remain in the company for the whole vesting period. How much should Paulina charge to compensation expense for the year ended December 31, 2020? a. P0 b. P40,000 c. P80,000 d. P160,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 7RE: On January 1, 2019, Phoenix Corporation adopts a performance-based share option plan for 25...

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On January 1, 2020, Jade Company granted 100 share options each to 500 employees, conditional upon the employees’ remaining in the entity’s employ during the vesting period. The share options vest at the end of a three-year period. On grant date, each share option has a fair value of P30. The par value per share is P100 and the option price is P120. On December 31, 2021, 30 employees have left and it is expected that on the basis of weighted average probability, a further 30 employees will leave before the of the three-year period. On December 31, 2022, only 20 employees actually left and all of the share options are exercised on such date. How much is the compensation expense that should be recognized for 2022?A . 500,000 B. 880,000 C. 380,000 D. 470,000
On January 1, 2020, ABC Company granted share options to each of the 300 employees working in the Accounting department. The options price is P90 and the par value is P70 per share.The share options vest at the end of a three-year period provided that the employees remain in the entity’s employ and provided the volume of sales will increase by 10% per year.The fair value of each share option on grant date is P35.The share will vest as follows: If the sales increase by 10%, each employee will receive 200 share options; If the sales increase by 15%, each employee will receive 300 share options.· On December 31, 2020, the sales increased by 10%, and no employees have left the entity· On December 31, 2021, sales increased by 15% and no employees have left.On December 31, 2022, the sales increased by 15% and 50 employees left the entityWhat is the share premium upon exercise of the share options on December 31, 2022?
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On January 1, 2020, ABC Company granted share options to each of the 300 employees working in the Accounting department. The options price is P90 and the par value is P70 per share.The share options vest at the end of a three-year period provided that the employees remain in the entity’s employ and provided the volume of sales will increase by 10% per year. The fair value of each share option on grant date is P35. The share will vest as follows: If the sales increase by 10%, each employee will receive 200 share options; If the sales increase by 15%, each employee will receive 300 share options. · On December 31, 2020, the sales increased by 10%, and no employees have left the entity· On December 31, 2021, sales increased by 15% and no employees have left.On December 31, 2022, the sales increased by 15% and 50 employees left the entityWhat is the compensation expense for 2022?
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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?
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On January 1, 2020, the shareholders of Fire Red Company approved a plan granting certain officers of the company nontransferable options to buy 50,000 shares of P 100 par ordinary share capital at P 280 per share. The option-pricing model used by the company indicates that the fair value of each option on January 2,2020 is P 30. The plan provides that the officers must be employed by the company until December 31,2022 and that options will expire at the end of 2023. At December 31, 2020, it was expected that 45,000 share options would vest, although in June 2021 some officers with 6,000 shares options left the entity. At the end of 2021, it was estimated that no other officers holding share options would leave before vesting of the options. However, an officer holding 1,500 share options left the entity in August 2022. All remaining options were exercised during 2023. REQUIRED: a) Prepare journal entries in the books of Fire Red Company pertaining to the options for years 2020-2023,…
On January 1, 2020, Bloody Red Company issued to its chief executive officer share options for the purchase of the company's ordinary share at a strike price of P 50. The options are exercisable, beginning January 1,2023 and expire on December 31,2024. The options may be exercised only if the officer is still in the employ of the company at the date of the exercise. The share options are valued at P 30 per share on January 1,2020 based on the option-pricing model used by the company. The number of share options granted will be based on the following sales level for the year 2022: Number of Options Level of Sales Below P 3,000,000 Nil P 30,0000 – P 50,000,000 10,000 shares Over P 50,000,000- P 70,000,000 15,000 shares Over P 70,000,000 18,000 shares Estimates of the sales for 2022 were as follows: Estimate made at 2022 Estimated sales January 1, 2020 P 35,000,000 December 31,2020 52,000,000 December 31,2021 70,000,000 Actual sales for 2022 were P 75,000,000. REQUIRED: Prepare all…
On April 1, 2020, Gamma Corp. purchases a call option for $ 500, which gives Gamma the right to buy 1,000 shares of Delta Inc. for $ 30 each until December 1, 2020. Delta Inc. shares are currently trading for $ 30. On June 30, 2020, the option is trading at $ 4,800 and the shares at $ 32 each. On December 1, 2020, Gamma exercises the option while the shares are trading at $38 each. Instructions: a. Determine the intrinsic value and the time value of the option on April 1, 2020. b. Determine the intrinsic value and the time value of the option On June 30, 2020. c. Prepare necessary journal entries to record the purchase of the option on April 1, the adjustment on June 30, 2020, Gamma's quarter end, the exercise of the option on December 1, if Gamma settles the option by taking delivery.
On January 1,2020 , Red Day Company granted 80 share options to each of its 400 employees for the purchase of P 100 par ordinary share at P 140 per share. The fair value of each option on this date was P 22. The employees are required to be in the employ of the company at least until the options vested. The share options will vest as follows: End of 2020, if earnings in 2020 increased of 15% End of 2021, if average annual earnings during 2020 would increase by at least 13%. During 2021, reported earnings increased by 12%. The company reported an increase in 2020 earnings by 13%. At December 31,2020, it was expected that earnings during 2020 would increase by at least 13%. During 2021, reported earnings increased by 12%. No employees left the company during the two year period 2020-2021. All options were exercised during 2022. REQUIRED: a.) All entries during 2020 through 2022. b.) Assume that the reported earnings in 2020 increased by 15%. How much compensation expense would be…