On November 1, 2016, Aymar Corp. adopted a stock option plan that granted options to key executives
Question:
On April 1, 2018, 3,500 options were terminated when some employees resigned from the company. The fair value of the shares at that date was $28. All of the remaining options were exercised during the year 2019: 31,500 on January 3 when the fair value was $52, and 10,000 on May 1 when the fair value was $58 a share. Assume that the entity follows ASPE and has chosen not to reflect forfeitures in its upfront estimate of compensation expense.
Instructions
(a) Prepare journal entries relating to the stock option plan for the years 2017, 2018, and 2019. Assume that the employees perform services equally in 2017 and 2018, and that the year end is December 31.
(b) What is the significance of the fact that the pricing model did not take forfeitures into account? Would taking expected forfeitures into account make the estimate of the total compensation expense higher or lower?
(c) What are the main differences between an employee stock option plan and a compensatory stock option plan?
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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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