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 19.5BE
To determine
The treatment of exercising the stock option plan by theemployee and journal entries to record it.
Giveninformation:
Number of shares given as an option is 5,000
Par value of common stock is $1.
Fair value of shares at grant date is $100,000.
Exercise price per option is $8 each.
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Rich Drennen’s personal statement of financial condition at December 31, 20X6, shows net worth of $400,000 before consideration of employee stock options owned on that date. Information relating to the stock options is as follows:
Options are to purchase 10,000 shares of Oglesby Corporation stock.
Options’ exercise price is $10 a share.
Options expire on June 30, 20X7.
Market price of the stock is $25 a share on December 31, 20X6.
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Prepare the necessary entries from 1/1/17 through 2/1/19 for the following events using the fair value method.
1.) On 1/1/17, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 30,000 shares of common stock at $40 per share. The par value is $10 per share
2.) On 2/1/17, options were granted to each of five executives to purchase 30,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/19. It is assumed that the options were for services performed equally in 2017 and 2018. The Black-Scholes option-pricing model determines the total compensation expense to be $3,200,000.
3.) On 2/1/19, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited.
Marie Drugs offered an incentive stock option plan to its employees. On January 1, 2015, options were granted for sixty thousand $0.2 par common shares. The
exercise price, $5, equals the market price of the common stock on the grant date. The options cannot be exercised before January 1, 2018, and expire December 31,
2021. Each option has a fair value of $1 based on an option pricing model. Which is the correct entry to record compensation expense for the year 2015?
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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