Assume that Sarazan Company has a share-option plan for top management. Each share option represents the right
Question:
Assume that Sarazan Company has a share-option plan for top management. Each share option represents the right to purchase a $1 par value ordinary share in the future at a price equal to the fair value of the shares at the date of the grant. Sarazan has 5,000 share options outstanding, which were granted at the beginning of 2020. The following data relate to the option grant.
Exercise price for options......................................................$40
Market price at grant date (January 1, 2020).......................$40
Fair value of options at grant date (January 1, 2020)............$6
Service period....................................................................5 years
Instructions
a. Prepare the journal entry(ies) for the first year of the share-option plan.
b. Prepare the journal entry(ies) for the first year of the plan assuming that, rather than options, 700 shares of restricted shares were granted at the beginning of 2020.
c. Now assume that the market price of Sarazan shares on the grant date was $45 per share. Repeat the requirements for (a) and (b).
d. Sarazan would like to implement an employee share-purchase plan for rank-and-file employees, but it would like to avoid recording expense related to this plan. Explain how employee share-purchase plans are recorded.
Par ValuePar value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119503668
17th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel