Question

On January 1, 2010, Roswall Corporation’s common stock is selling for $55 per share. On this date, Roswall creates a compensatory share option plan for its 60 key employees. The plan document states that each employee may purchase 500 shares of its $10 par common stock for $55 per share after working for the company for three years. On this date, based on an option pricing model, Roswall estimates that each option has a value of $18. Historically, Roswall has experienced an employee turnover rate of 5% per year and, on the grant date it expects this rate to continue over the next three years. Because of lower turnover, at the end of 2011 Roswall changes its estimated turnover rate to 4% for the entire service period. At the end of 2012, the options vest for 54 employees. On January 13, 2013, ten executives exercise their options when the stock is selling for $75 per share.

Required
1. Prepare a schedule of the Roswall Corporation’s compensation computations for its compensatory share option plan for 2010 through 2012 (round all computations to the nearest dollar).
2. Prepare the journal entries of Roswall Corporation for 2010 through 2013 in regard to this plan.
3. Show how the account(s) related to the plan is (are) reported in the stockholders’ equity section of Roswall Corporation’s balance sheet on December 31, 2011.



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  • CreatedDecember 09, 2013
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