am.111.. Recording Performance Based Stock OptionsThrough a performance share option plan, Anderson Inc. granted executives and other key employees share option awards where vesting is contingent upon meeting company-wide performance goals, includingdecreasing time for a new product launch and specified sales targets. The options vest over a three-year period (considered the requisite service period) and expire in 6 years. The company granted 26,000 optionson January 1 of Year 1, for the purchase of 26,000 shares at $30 per share. The company estimates the fair value of the options to be $3 per share based upon an option-pricing model. Management believes it isprobable that the company will achieve the specified performance targets defined in the performance share option plan. Record compensation expense (if any) for Year 1.Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).DateAccount NameDr.Cr.Dec. 31

Recording compensation expense for performance-based stock options involves several considerations.…

Answered: Recording Performance Based Stock…

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 8E

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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.
LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2018. Theoptions entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement ofspecific financial goals over the next four years. Attainment of these goals is considered probable initially andthroughout the service period. The options have a current fair value of $12 per option.Required:1. Prepare the appropriate entry when the options are awarded on January 1, 2018.2. Prepare the appropriate entries on December 31 of each year 2018–2021.3. Suppose at the beginning of 2020, LCI decided it is not probable that the performance objectives will be met.Prepare the appropriate entries on December 31 of 2020 and 2021.
LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2016. The options entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement of specific financial goals over the next four years. Attainment of these goals is considered probable initially and throughout the service period. The options have a current fair value of $12 per option. Required: 1. Prepare the appropriate entry when the options are awarded on January 1, 2016. 2. Prepare the appropriate entries on December 31 of each year 2016–2019. 3. Suppose at the beginning of 2018, LCI decided it is not probable that the performance objectives will be met. Prepare the appropriate entries on December 31 of 2018 and 2019.
Recording Stock Options: Issuance and Exercise In October 2019, Meno Corp. announced a stock option incentive plan for its top executives. The plan provides each executive 6,000 stock options for Meno's common stock, $1 par, at an exercise price of $36 per share reduced by the percentage increase in EPS from December 31, 2019, to December 31, 2021. 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 exercise date, and the requisite service period ends on the first possible exercise date. On January 1, 2020, Martha Smith was granted 3,000 options when the market price was $30 per share. Using an option-pricing model, the fair value of the options granted to Smith was valued at $9 per option. On December 31, 2020, Meno's management believed that Smith would exercise her options at the first exercise date. By December 31, 2021, Meno's EPS had increased by 20%. Smith…
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. . a. Compute the total amount of compensation cost for the grant made on April 1 of Year 1. $ 36,000 ✔ b.…
Recording Stock Options: Issuance and Exercise In October 2019, Meno Corp. announced a stock option incentive plan for its top executives. The plan provides each executive 9,000 stock options for Meno’s common stock, $1 par, at an exercise price of $36 per share reduced by the percentage increase in EPS from December 31, 2019, to December 31, 2021. 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 exercise date, and the requisite service period ends on the first possible exercise date.On January 1, 2020, Martha Smith was granted 3,000 options when the market price was $30 per share. Using an option-pricing model, the fair value of the options granted to Smith was valued at $9 per option. On December 31, 2020, Meno’s management believed that Smith would exercise her options at the first exercise date. By December 31, 2021, Meno’s EPS had increased by 20%. Smith…
On January 1 of Year 1, Holiday Inc. offered a stock option incentive plan to a top executive. The plan provided the executive 300 stock options for Holiday Inc. $1 par value, common stock at an option price of $15 per share through the expiration date of January 1 of Year 7. The fair value of the options based upon an option-pricing model on January 1 of Year 1, is $9,000. The market price at year-end of Holiday Inc. stock is $15 per share on January 1 of Year 1, and $18 on December 31 of Year 1. The requisite service period is 3 years. The options were not exercised due to the stock price remaining below $15 per share after the vesting period. Record the entry on January 1 of Year 7 for the expiration of the stock options. Note: If a line in a journal entry isn't required for the transaction, select "N/A—debit" and "N/A—credit" as the account names and leave the Dr. and Cr. answers blank (zero).
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Holden Company has a share appreciation rights plan for its key executives. This SAR plan gives each qualifying executive the right to receive cash, stock, or a combination of both equal to the excess of the quoted market price over the option price of the company’s $10 par common stock on the date of exercise. The key characteristics and requirements of this SAR plan are as follows: • Option price: Market price on date of grant • Service period: 4 years • Exercise limit: Within 6 years after the service period has expired On January 1, 2019, Sarah Mendelson was granted SAR to 10,000 shares of the company’s common stock under the requirements of the SAR plan. She is expected to complete the service period and receive cash on the date of exercise. On December 31, 2019, Mendelson exercised her rights to receive $27,000 cash and the remainder in common stock. The fair value per SAR was as follows: 12/31/19, $4.00; 12/31/20, $4.10; 12/31/21, $3.80; 12/31/22, $5.50; and…
On January 1, 2019, Kyle company established a share appreciation rights plan to key employees where they are to receive cash at any time during the next four years. The predetermined price is P40 on 60,000 share appreciation rights (SARs) of which 20,000 SARs were exercised on December 31, 2021. Market prices on the following dates are as follows: Jan. 1, 2019, P50, Dec. 31, 2019, P56, Dec. 31, 2020, P70 and P60 on Dec. 31, 2021.a. Determine the amount of compensation expense to be recognized for the year 2019, 2020 and 2021.b. Determine the amount of liability to be presented in the statement of financial position for the year ended December 31, 2019, December 31, 2020 and December 31, 2021.c. Prepare the journal entries for 2019, 2020 and 2021.
Page of 5 ZOOM Practice Exercises - Stock Options On November 1, 2020, DaBaby Company adopted a stock-option plan that granted options to key executives to purchase 42,500 shares of the company's $10 par value common stock. The options were granted on January 2, 2021 and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $30, and the fair value option-pricing model determines the total compensation expense to be $210,000. 3. All of the options were exercised during the year 2023: 20,100 on January 15 when the market price was $48, and 22,400 on June 1 when the market price was $56 a share. Prepare journal entries relating to the stock option plan for the years 2021, 2022, and 2023. Assume that the employee performs services equally in 2022 and 2023. General Journal Debit Credit ASA ENG INTI
Recording Entries for Restricted Stock Unit Plan In late 2020, the board of directors of Arches Corp. approved a restricted stock unit plan to be awarded to select employees. The plan included the following general terms. Each restricted stock unit is equivalent to one share of $5 par value, common stock of Arches Corp. The restricted stock units vest two years after the date of the grant. Shares are distributed after the vesting period if the employee is still employed by the company. On December 31, 2020, 15,600 restricted stock units were granted to key employees under this plan when the market price of the common stock was $18 per share. Required a. Compute the total amount of compensation cost for the restricted stock unit plan.b. Prepare the journal entry on the date of grant, December 31, 2020.c. Prepare the journal entry on December 31, 2021.d. Prepare the journal entry on December 31, 2022, including the issuance of the shares of stock. Note: If a journal entry isn't…

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