On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 32 million stock options were granted, exercisable for 32 million shares of Martinez's $1 par common stock. The options are exercisable between January 1, 2027, and December 31, 2029, at 80% of the quoted market price on January 1, 2024, which was $30. ⚫ The fair value of the 32 million options, estimated by an appropriate option pricing model, is $6 per option. ⚫ Martinez chooses the option to recognize forfeitures only when they occur. ⚫ Ten percent (3.2 million) of the options were forfeited when an executive resigned in 2025. • All other options were exercised on July 12, 2028, when the stock's price jumped unexpectedly to $34 per share. Required: 1. When is Martinez's stock option measurement date? 2. Determine the compensation expense for the stock option plan in 2024. (Ignore taxes.) 3. Prepare the journal entries to reflect the effect of forfeiture of the stock options on Martinez's financial statements for 2025 and 2026. 5. Prepare the journal entry to account for the exercise of the options in 2028. Complete this question by entering your answers in the tabs below.
On October 15, 2023, the board of directors of Martinez Materials Corporation approved a stock option plan for key executives. On January 1, 2024, 32 million stock options were granted, exercisable for 32 million shares of Martinez's $1 par common stock. The options are exercisable between January 1, 2027, and December 31, 2029, at 80% of the quoted market price on January 1, 2024, which was $30. ⚫ The fair value of the 32 million options, estimated by an appropriate option pricing model, is $6 per option. ⚫ Martinez chooses the option to recognize forfeitures only when they occur. ⚫ Ten percent (3.2 million) of the options were forfeited when an executive resigned in 2025. • All other options were exercised on July 12, 2028, when the stock's price jumped unexpectedly to $34 per share. Required: 1. When is Martinez's stock option measurement date? 2. Determine the compensation expense for the stock option plan in 2024. (Ignore taxes.) 3. Prepare the journal entries to reflect the effect of forfeiture of the stock options on Martinez's financial statements for 2025 and 2026. 5. Prepare the journal entry to account for the exercise of the options in 2028. Complete this question by entering your answers in the tabs below.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education