On January 1, 2017, Waldorf Corporation granted 40,000 options to key executives. Each option allows the executive
Question:
On May 1, 2019, 12,000 options were exercised when the market price of Waldorf's shares was $34 per share. The remaining options lapsed in 2020 because executives decided not to exercise their options. Management was indeed correct in their assumption regarding forfeitures in that all executives remained with the company. Assume that Waldorf follows IFRS.
Instructions
(a) Prepare the necessary journal entries related to the stock option plan for the years ended December 31, 2017 through 2020.
(b) What is the significance of the $25 market price of the Waldorf shares at the date of grant? Would the exercise price normally be higher or lower than the market price of the shares on the date of grant?
(c) What is the significance of the $34 market price of the Waldorf shares at May 1, 2019, the date of the exercise of the stock options?
(d) What likely happened to the market price of the shares in 2020?
(e) What motive might an employee have for delaying the exercise of the stock option? What are the risks involved?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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