Pont Chemical Remediation Ltd. issued options in 20X6 allowing the holder to acquire 50,000 common shares in
Question:
Pont Chemical Remediation Ltd. issued options in 20X6 allowing the holder to acquire 50,000 common shares in five years’ time at an acquisition price of $20 per share. Using an option pricing model, the options are valued at $120,000. The options were issued for consulting and promotion work done, tasks that are not easily valued.
Required:
1. Provide the journal entry to record the transaction.
2. Assume that the options were exercised when the market price of common shares is $44. Provide the entry for exercise.
3. Alternately, assume that the options were allowed to lapse when the price of common shares is $16. Provide the entry for the lapse.
Step by Step Answer:
Intermediate Accounting Volume 2
ISBN: 9781260881240
8th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel