On November 6, 2009, Gunpowder Corp.’s board of directors approved

On November 6, 2009, Gunpowder Corp.’s board of directors approved a share option plan for key executives. On January 2, 2010, a specific number of share options were granted. These options were exercisable between January 2, 2012, and December 31, 2014, at 90% of the quoted market price on January 2, 2010. The service period is for 2010 and 2011. Some options were forfeited when an executive resigned in 2011. All other options were exercised during 2012.

Required
1. How should Gunpowder determine the compensation expense, if any, for the share option plan in 2010?
2. What is the effect of forfeiture of the share options on Gunpowder’s financial statements for 2011?
3. What is the effect of the share option plan on the balance sheet at December 31, 2012? Be specific as to the changes in balance sheet accounts between November 6, 2009 and December 31, 2012.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...