Respuesta :
1. When is Ensor’s stock option measurement date?
Answer: The stock option measurement date is on January 1st, 2021
Explanation:
- The measurement date of the stock option is the day it is granted with information about:
+) number of share each individual staff receives
+) the price of the option
It was indicated in the question: "On January 1, 2021, 26 million stock options were granted"
=> The measurement date is January 1, 2021 with the amount of 26 millions stock options were granted.
2. Determine the compensation expense for the stock option plan in 2021. (Ignore taxes.)
Answer: Compensation expense is $52 million
Explanation:
The fair value per stock option is 6$ per option.
=> Total compensation expense for 26 million options would be: 6 x 26 million = $156 million
As the options are exercisable between 01/01/2024 and 31/12/2016
=> The vesting period is 3 years from 01/01/2021 to 31/12/2023
=> The compensation expense for the stock option plan in 2021 is calculated as following:
Compensation expense year 2021 = Total compensation expense/ Vesting period = 156 million / 3 = $52 million
3. Prepare the journal entries to reflect the effect of forfeiture of the stock options on Ensor’s financial statements for 2022 and 2023.
Answer & Explanation:
2.6 million (10%) of the options were forfeited
=> The remaining percentage represent the unforfeited = 100% - 10% = 90%
- In 2022
As 2022 is the second year of the vesting period:
The compensation expense of 2022 = (Total compensation expense * 90% * The order of period/ Number of period) - Compensation expense Year 2021
= $156 million × 90% × 2/3 - $52 million = $41.6 million
2022 Debit Credit
Compensation expense 41.6 million
Paid-in-capital-stock options 41.6 million
- In 2023
As 2023 is the third year of the vesting period:
The compensation expense of 2023 = (Total compensation expense * 90% * The order of period/ Number of period) - Compensation expense Year 2021 - Compensation expense of 2022
= $156 million × 90% × 3/3 - $52 million - $41.6 million = $46.8 million
2023 Debit Credit
Compensation expense 46.8 million
Paid-in-capital-stock options 46.8 million
5. Prepare the journal entry to account for the exercise of the options in 2025.
Answer & explanation:
The number of shares exercised = 26 million - 2.6 million = 23.4 million
It is given that the stock options are exercisable between January 1, 2024, and December 31, 2026 at 80% of the quoted market price on January 1, 2021, which was $20.
The exercise price of the stock = $20 × 80% = $16
Cash = Amount paid for shares = Exercise price × Number of options exercise = 16 × 23.4 million = 374.4 million
The paid-in-capital Stock option = 23.4 million x 6 = 140.4 million
Common stock (23.4 million at $1 par per share) = 23.4 million
=> Pain in capital - excess of par = 491.4 million
Journal entry:
General Journal Debit Credit
Cash 374.4 million
Paid-in-capital - Stock option 140.4 million
Common stock 23.4 million
Paid in capital - excess of par 491.4 million
