Question

In: Accounting

Under its executive stock option plan, Worcester Corporation granted options on January 1,2018, that permit executives...

Under its executive stock option plan, Worcester Corporation granted options on January 1,2018, that permit executives to purchase 20 million of the company's $1 par common shares within the next eight years, but before December 31,2020 ( the vesting date). the exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. No forfeitures are anticipated. The options are exercised on April 2, 2021, when the market price is $21 per share. Prepare the journal entries.

1 - 12/31/2020

2- 04/02/2021

Expert Solution

Solution:

Total compensation expense = granted options * fair value of options

=20 million * 5$ = 100 million

It is for three years, i.e.; 2018 to 2020

Compensation expense for 1 year=100 million /3 = 33.33 million

Journal entry

Date

Entry

Debit

Credit

31 Dec2020

Compensation expense A/c Dr.

Paid in capital-stock options

(compensation expenses)

33.33 million

02 Apr 2021

Cash A/c Dr. (20 million*18$)

Paid in capital-stock options a/c Dr.

Common stock (20 million *$1 par)

Paid in capital excess of par (bal. fig)

(360+100-200(options exercised)

360 million

100 million

20 million

440million

*Market price on the date of options exercise is not relevant for this problem

ekkarill92 answered 2 years ago

Under its executive stock option plan, M Corporation granted options on January 1, 2018, that permit...

Under its executive stock option plan, M Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were...

Under its executive stock option plan, Q Corporation granted options on January 1, 2018, that permit...

Under its executive stock option plan, Q Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were...

part a Under its executive stock option plan, N Corporation granted options on January 1, 2018,...

part a Under its executive stock option plan, N Corporation granted options on January 1, 2018, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No...

Under its executive stock option plan, National Corporation granted 20 million options on January 1, 2021,...

Under its executive stock option plan, National Corporation granted 20 million options on January 1, 2021, that permit executives to purchase 20 million of the company’s $1 par common shares within the next seven years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $24 per share. The fair value of the options, estimated by an appropriate option pricing model, is $3 per option. Suppose...

Under its executive stock option plan, National Corporation granted 30 million options on January 1, 2021,...

Under its executive stock option plan, National Corporation granted 30 million options on January 1, 2021, that permit executives to purchase 30 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $27 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Suppose...

On January 2, 2015, Ryan Company adopted a stock-option plan that granted options to key executives...

On January 2, 2015, Ryan Company adopted a stock-option plan that granted options to key executives to purchase 20,000 shares of the company's $5 par value common stock. The options were granted on January 2, 2015, and were exerciseable two years after the date of grant if the grantee was still an employee of the company. The option exercise price was set at $30, and the fair value option-pricing model determines the total compensation expense to be $400,000. What is...

On November 1, 2020, Carla Company adopted a stock-option plan that granted options to key executives...

On November 1, 2020, Carla Company adopted a stock-option plan that granted options to key executives to purchase 33,900 shares of the company’s $9 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...

On November 1, 2017, Whispering Company adopted a stock-option plan that granted options to key executives...

On November 1, 2017, Whispering Company adopted a stock-option plan that granted options to key executives to purchase 27,300 shares of the company’s $10 par value common stock. The options were granted on January 2, 2018, 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...

On November 1, 2017, Concord Company adopted a stock-option plan that granted options to key executives...

On November 1, 2017, Concord Company adopted a stock-option plan that granted options to key executives to purchase 39,000 shares of the company’s $9 par value common stock. The options were granted on January 2, 2018, 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...

On November 1, 2017, Blue Company adopted a stock-option plan that granted options to key executives...

On November 1, 2017, Blue Company adopted a stock-option plan that granted options to key executives to purchase 30,000 shares of the company’s $10 par value common stock. The options were granted on January 2, 2018, 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...