On October 15, 2015, the board of directors of Ensor MaterialsCorporation approved a stock option plan for key executives. OnJanuary 1, 2016, 38 million stock options were granted, exercisablefor 38 million shares of Ensor's $1 par common stock. The optionsare exercisable between January 1, 2019, and December 31, 2021, at80% of the quoted market price on January 1, 2016, which was $10.The fair value of the 38 million options, estimated by anappropriate option pricing model, is $3 per option.
3.8 million options were forfeited when an executive resigned in2017. All other options were exercised on July 12, 2020, when thestock's price jumped unexpectedly to $36 per share.
When is Ensorâs stock option measurement date?
Determine the compensation expense for the stock option plan in2016. (Ignore taxes.) (Enter your answer in millions (i.e.,10,000,000 should be entered as 10).)
Prepare the necessary journal entries. (If no entry isrequired for a transaction/event, select "No journal entryrequired" in the first account field. Enter your answers inmillions rounded to 1 decimal place (i.e., 5,500,000 should beentered as 5.5).)
Record compensation expense on December 31, 2017.
Record compensation expense on December 31, 2018.
Record the exercise of the options in 2020.
On October 15, 2015, the board of directors of Ensor MaterialsCorporation approved a stock option plan for key executives. OnJanuary 1, 2016, 38 million stock options were granted, exercisablefor 38 million shares of Ensor's $1 par common stock. The optionsare exercisable between January 1, 2019, and December 31, 2021, at80% of the quoted market price on January 1, 2016, which was $10.The fair value of the 38 million options, estimated by anappropriate option pricing model, is $3 per option.
3.8 million options were forfeited when an executive resigned in2017. All other options were exercised on July 12, 2020, when thestock's price jumped unexpectedly to $36 per share.
When is Ensorâs stock option measurement date?
| Determine the compensation expense for the stock option plan in2016. (Ignore taxes.) (Enter your answer in millions (i.e.,10,000,000 should be entered as 10).) Prepare the necessary journal entries. (If no entry isrequired for a transaction/event, select "No journal entryrequired" in the first account field. Enter your answers inmillions rounded to 1 decimal place (i.e., 5,500,000 should beentered as 5.5).) Record compensation expense on December 31, 2017. Record compensation expense on December 31, 2018. Record the exercise of the options in 2020. |
Related questions
Walters Audio Visual, Inc., offers a stock option plan to its regional managers. On January 1, 2016, options were granted for 40 million $1 par common shares. The exercise price is the market price on the grant date, $8 per share. Options cannot be exercised prior to January 1, 2018, and expire December 31, 2022. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. Because the plan does not qualify as an incentive plan, Walters will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. The income tax rate is 40%.
Required: 1. Determine the total compensation cost pertaining to the stock option plan. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)
| 2. Prepare the necessary journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) 1. Record compensation expense on December 31, 2016. 2. Record any tax effect related to compensation expense recorded in 2016. 3. Record compensation expense on December 31, 2017. 4. Record any tax effect related to compensation expense recorded in 2017. 5. Record the exercise of the options on March 20, 2021 when the market price is $12 per share. 6. Record any tax effect related to the exercise of the options. |
