On January 1, 2020, the shareholders of Fire Red Company approved a plan granting certain officers of thecompany 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 isP 30. The plan provides that the officers must be employed by the company until December 31,2022 and thatoptions 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 someofficers with 6,000 shares options left the entity. At the end of 2021, it was estimated that no other officersholding share options would leave before vesting of the options. However, an officer holding 1,500 share optionsleft 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, inclusive.

Employees Stock Option Most of the companies practice to provide the stock option facility to their…

Answered: On January I, 2020, the shareholders of…

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 6C

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On January 1, 2019, Phoenix Corporation adopts a performance-based share option plan for 25 executives, with the number of shares based on the yearly increase in sales. At the end of 2019, based on a 10% increase in sales, it expects that each executive will be granted 150 options and that the fair value of an option expected to vest is 15.75. Phoenix expects a turnover rate of 15% over the 3-year service period. Determine the compensation expense for 2019 for this plan.
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 June 30, 2020, Kikyo Company granted compensatory share options for 48,000 P20 par value ordinary shares to certain key employees. The market price of the share on that date was P36 and the option price was P30. The Black-Scholes option pricing model measured the total compensation expense to be PS,100,000. The options are exercisable beginning January 1, 2023, provided the key employees are still in entity's employ at the time the options are exercised. The options expire on June 30, 2024. On January 15, 2023, when the market price of the share was P42, all 48,000 options were exercised. What is the compensation expense for 2022?
On January 1, 2020, BTS Corporation granted share options to its employees with a fair value of P4,500,000. The options vest in three years and are exercisable starting January 1, 2023 until Dec. 31, 2023. On December 31, 2020, it was estimated that 5% of the employees will leave the Company. This estimate was revised to 6% during the year 2021. On December 31, 2022, it was determined that 80% of the employees remained in the company. What is the amount charged to compensation expense in 2022? P1,425,000 P780,000 P1,500,000 P1,395,000
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?
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, 2021, Major Corp. granted its employees an option to purchase 5,000 of Major's common shares at $50 per share. The Black-Scholes option pricing model determined total compensation expense to be $225,000. The option is exercisable on December 31, 2022, after employees complete two years of service. The market price of Major's shares on December 31, 2021 was $52. For December 31, 2021, Major should recognize compensation expense of: Question 10 options: $10,000 $112,500 $250,000 $225,000 On December 1, 2021, Parfait Ltd. borrowed $180,000 from a local bank by signing a four-month, 5% interest bearing note. All payments will be made at the note's maturity date. Assuming Parfait has a December 31 year-end, the adjusting journal entry on December 31 will include a: Question 1 options: debit to Interest payable of $750. credit to Notes Payable of $750…
Ultimate Company granted 100 share options to each of its 300 employees on January 2, 2018. The option plan allows the employees to purchase P100 par value ordinary share at P180 per share. The option pricing model used by the company indicated that the fair value of each option on January 2, 2020 was P30. The plan provides that the employees must be employed by the company for the next three years and that the options will expire at the end of 2021.At January 2, 2018, it was estimated that 20% of the employees will leave during the next three years. Actual and revised estimate of employees leaving the company during 2018, 2019 and 2020 are as follows:2018 – 10 employees left; revised estimate is 10% of the remaining options2019 – 15 employees left; revised estimate is 12% of the remaining options2020 – 12 employees left During 2021, 150 of the employees exercised their options while the remaining employees allowed their options to lapse.How much is the compensation expense in 2019?
On 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?
On January 1, 2020, EM Corporation granted share options to its employees with a fair value of P4,500,000. The options vest in three years and are exercisable starting January 1, 2023 until Dec. 31, 2023. On December 31, 2020, it was estimated that 5% of the employees will leave the Company. This estimate was revised to 6% during the year 2021. On December 31, 2022, it was determined that 80% of the employees remained in the company. What is the amount charged to compensation expense in 2022? A.P1,500,000B.P1,425,000C.P780,000D.P1,395,000
On January 1, 2020, Green Corporation granted share options to its employees with a fair value of P4,500,000. The options vest in three years and are exercisable starting January 1, 2023 until Dec. 31, 2023. On December 31, 2020, it was estimated that 5% of the employees will leave the Company. This estimate was revised to 6% during the year 2021. On December 31, 2022, it was determined that 90% of the employees remained in the company. What is the amount charged to compensation expense in year 2020?
On January 1, 2020, The Red Hot Company established a share option plan for its selected senior employees. A total of 30,000 options were granted that permit said employees to purchase 30,000 shares of P 20 par ordinary share capital at P 35 per share. Options are exercisable beginning on January 1,2023 and can be exercised anytime from January 1,2023 through December 31,2024.At January 1, 2020, the market price for the Red Hot Company share option was P 8, based on an option pricing model used by the entity. All, but 2,000 share options were exercised on December 31,2023.REQUIRED:a) Computation of compensation expense for years 2020, 2021 and 2022.b) Entries as a result of the foregoing for year 2020 through 2023, inclusive.

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