On November 1, 2011, Columbo Corp. adopted a stock option plan that granted options to key executives
Question:
On April 1, 2012, 3,500 options were terminated when some employees resigned from the company. The market value of the shares at that date was $28. All of the remaining options were exercised during the year 2013: 31,500 on January 3 when the market price was $52, and 10,000 on May 1 when the market price was $58 a share. Assume that the entity follows PE GAAP and has chosen not to reflect forfeitures in their upfront estimate of compensation expense.
Instructions
(a) Prepare journal entries relating to the stock option plan for the years 2011, 2012, and 2013. Assume that the employees perform services equally in 2011 and 2013, and that the year end is December 31.
(b) What is the significance of the fact that the pricing model did not take into account forfeitures? Would taking expected forfeitures into account make the estimate of the total compensation expense higher or lower?
(c) List the types of stock compensation plans and when they might be used.
(d) How are employee and compensatory option plans different from other options? GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...
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Related Book For
Intermediate Accounting
ISBN: 978-0470161012
9th Canadian Edition, Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.
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