Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Question
Chapter 19, Problem 19.1P
a.
To determine
To calculate: The compensation expense for year 2.
Given Information:
Number of shares granted is 150,000.
Exercise price of the shares is $20.
Fair value at the grant date is $66.
Vesting period is 3 years.
Vesting probability is 100% in each year.
b.
To determine
The compensation expense for year 3 and journal entry of it.
Given Information:
Number of shares granted is 150,000.
Fair value at the grant date is $66.
Exercise price of the shares is $20.
Vesting period is 3 years.
Vesting probability is 100% in year 1 and 2.
Vesting probability is 75% in year 3
c.
To determine
The journal entry at the time of expiration of remaining stock.
Given Information:
Number of shares granted is 150,000.
Fair value at the grant date is $66.
Exercise price of the shares is $20.
Vesting period is 3 years.
Vesting probability is 100% in year 1 and 2.
Vesting probability is 75% in year 3
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Allied Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 100,000 options were granted for 100,000 $10 par common shares. The exercise price equals the $25 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $15 based upon an option pricing model.
At the end of the first year, it is expected that 100% of employees will exercise the options. By the end of Year 2, it is expected that only 80% of the options will be exercised. Allied chooses to adjust the fair value of options for the estimated forfeitures.
What are the journal entries to reflect the first year and second years' compensation expense? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.)
Accounting for Stock Options
On April 1 of Year 1, Badger Corp. announced a stock option incentive plan for its top executives. The plan provides certain executives stock options for the company's common stock.
Each option allows for the purchase of one share of common stock, par $1, at a standard option price of $25 per share. The rights are nontransferable and are exercisable three years
after the grant date and prior to five years from the grant date. Continuing employment is required through the exercise date, and the requisite service period ends on the first possible
exercise date.
On April 1 of Year 1, 4,000 options were granted to employees when the market price was $30 per share. Using an option-pricing model, the fair value of the options granted was
$36,000. Employees exercised 2,400 options on June 30 of Year 4, when the market price of the stock was $45 per share.
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a. Compute the total amount of compensation cost for the grant made on April 1 of Year 1.
$ 36,000 ✔
b.…
Aylmer Corp., a public company, adopted a stock option plan on November 30, Y4, designated 120,000
common shares as available for the granting of options to officers of the corporation at an exercise price of $9.20 a share.
The market value was $11.25 a share on November 30, Y4.
On January 2, Y5, options to purchase 55,000 shares were granted to President Riley.
These were to be earned equally over the subsequent two years. The shares' market value was $14.00 a share on January 2, Y5.
The options were exercisable for a period of one year following the years in which the services were rendered.
On January 2, Y5, the value of the options was estimated at $653,000.
On June 8, Y7, the president exercised 42,000 of the options. The shares' market value was $9.60 a share on December 31, Y7
when the rest of the options expired.
REQUIRED:
a. Prepare the necessary journal entry in Y4 when the stock options…
Chapter 19 Solutions
Intermediate Accounting
Ch. 19 - What is the allocation period used to expense...Ch. 19 - How do companies account for stock-based...Ch. 19 - Do companies with equity-based compensation plans...Ch. 19 - When accounting for employee stock options, will a...Ch. 19 - Prob. 19.5QCh. 19 - Prob. 19.6QCh. 19 - Prob. 19.7QCh. 19 - Prob. 19.8QCh. 19 - Prob. 19.9QCh. 19 - Prob. 19.10Q
Ch. 19 - Prob. 19.1MCCh. 19 - Prob. 19.2MCCh. 19 - Prob. 19.3MCCh. 19 - Prob. 19.4MCCh. 19 - Prob. 19.5MCCh. 19 - Prob. 19.6MCCh. 19 - Prob. 19.7MCCh. 19 - Prob. 19.8MCCh. 19 - Prob. 19.1BECh. 19 - Prob. 19.2BECh. 19 - Prob. 19.3BECh. 19 - Prob. 19.4BECh. 19 - Prob. 19.5BECh. 19 - Prob. 19.6BECh. 19 - Employee Stock Options, Liability-Classified...Ch. 19 - Prob. 19.8BECh. 19 - Prob. 19.9BECh. 19 - Prob. 19.10BECh. 19 - Prob. 19.11BECh. 19 - Prob. 19.12BECh. 19 - Prob. 19.13BECh. 19 - Prob. 19.14BECh. 19 - Prob. 19.15BECh. 19 - Prob. 19.16BECh. 19 - Prob. 19.17BECh. 19 - Prob. 19.18BECh. 19 - Prob. 19.19BECh. 19 - Prob. 19.20BECh. 19 - Prob. 19.21BECh. 19 - Prob. 19.22BECh. 19 - Prob. 19.23BECh. 19 - Prob. 19.24BECh. 19 - Prob. 19.25BECh. 19 - Prob. 19.26BECh. 19 - Prob. 19.27BECh. 19 - Prob. 19.28BECh. 19 - Prob. 19.1ECh. 19 - Prob. 19.2ECh. 19 - Employee Stock Options. Equity-Classified Awards....Ch. 19 - Prob. 19.4ECh. 19 - Prob. 19.5ECh. 19 - Prob. 19.6ECh. 19 - Prob. 19.7ECh. 19 - Prob. 19.8ECh. 19 - Prob. 19.9ECh. 19 - Prob. 19.10ECh. 19 - Prob. 19.11ECh. 19 - Prob. 19.12ECh. 19 - Prob. 19.13ECh. 19 - Prob. 19.14ECh. 19 - Prob. 19.15ECh. 19 - Prob. 19.16ECh. 19 - Prob. 19.1PCh. 19 - Prob. 19.2PCh. 19 - Prob. 19.3PCh. 19 - Prob. 19.4PCh. 19 - Prob. 19.5PCh. 19 - Prob. 19.6PCh. 19 - Prob. 19.7PCh. 19 - Prob. 19.8PCh. 19 - Prob. 19.9PCh. 19 - Prob. 19.10PCh. 19 - Prob. 19.11PCh. 19 - Prob. 19.12PCh. 19 - Prob. 1JCCh. 19 - Prob. 2FSCCh. 19 - Prob. 1SSCCh. 19 - Prob. 2SSCCh. 19 - Basis for Conclusions Case 1: Are Employee Stock...Ch. 19 - Prob. 2BCC
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