Buff McGuff, Inc. decided to provide stock options to top management. The stock options will allow...

 

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Buff McGuff, Inc. decided to provide stock options to top management. The stock options will allow management employees to purchase 12,000 shares of common stock following a five year vesting period that begins on the grant date, January 1, 20X1. The stock options have an exercise price of $60 per share, which is the market price of Buff McGuff, Inc.'s common stock on the grant date. The fair value of the stock options at the grant date is $15 per share and the fair value of the stock options at December 31, 20X1 is $17 per share. As of December 31, 20X4, the fair value of the stock options as of the end of the vesting period (December 31, 20X5) is estimated to be $20 per share. NOTE: Buff McGuff, Inc.'s common stock has a par value of $5 per share. Required: a) How much stock compensation expense will Buff McGuff recognize during 20X1, 20X2, 20X3, 20X4, and 20X5? Assume 6% of the stock options are forfeited during 20X4. b) What is the journal entry that Buff McGuff will record on December 31, 20X1? c) What is the journal entry that Buff McGuff will record on December 31, 20X4? d) What is the journal entry that Buff McGuff will record when the stock options are exercised? e) WHAT IF this stock compensation plan is for stock appreciation rights (SARS) that will pay the stock appreciation amount in cash at the vesting date? Assume the fair value of the stock appreciation rights over time is the same as the fair value of the stock options. • How much stock compensation expense will Buff McGuff recognize during 20X1, 20x2, 20X3, 20X4, and 20X5? Assume 6% of the stock appreciation rights are forfeited during 20x4. What is the journal entry that Buff McGuff will record on December 31, 20X1? What are the two journal entries that Buff McGuff will record on the vesting date, December 31, 20X5? f) WHAT IF this stock compensation plan is for restricted stock that is given to the employees on the vesting date with an exercise price of $0? • • • How much stock compensation expense will Buff McGuff recognize during 20X1, 20X2, 20X3, 20X4, and 20X5? Assume 6% of the restricted stock grants are forfeited during 20x4. What is the journal entry that Buff McGuff will record on December 31, 20X1? What are the two journal entries that Buff McGuff will record on the vesting date, December 31, 20X5? Buff McGuff, Inc. decided to provide stock options to top management. The stock options will allow management employees to purchase 12,000 shares of common stock following a five year vesting period that begins on the grant date, January 1, 20X1. The stock options have an exercise price of $60 per share, which is the market price of Buff McGuff, Inc.'s common stock on the grant date. The fair value of the stock options at the grant date is $15 per share and the fair value of the stock options at December 31, 20X1 is $17 per share. As of December 31, 20X4, the fair value of the stock options as of the end of the vesting period (December 31, 20X5) is estimated to be $20 per share. NOTE: Buff McGuff, Inc.'s common stock has a par value of $5 per share. Required: a) How much stock compensation expense will Buff McGuff recognize during 20X1, 20X2, 20X3, 20X4, and 20X5? Assume 6% of the stock options are forfeited during 20X4. b) What is the journal entry that Buff McGuff will record on December 31, 20X1? c) What is the journal entry that Buff McGuff will record on December 31, 20X4? d) What is the journal entry that Buff McGuff will record when the stock options are exercised? e) WHAT IF this stock compensation plan is for stock appreciation rights (SARS) that will pay the stock appreciation amount in cash at the vesting date? Assume the fair value of the stock appreciation rights over time is the same as the fair value of the stock options. • How much stock compensation expense will Buff McGuff recognize during 20X1, 20x2, 20X3, 20X4, and 20X5? Assume 6% of the stock appreciation rights are forfeited during 20x4. What is the journal entry that Buff McGuff will record on December 31, 20X1? What are the two journal entries that Buff McGuff will record on the vesting date, December 31, 20X5? f) WHAT IF this stock compensation plan is for restricted stock that is given to the employees on the vesting date with an exercise price of $0? • • • How much stock compensation expense will Buff McGuff recognize during 20X1, 20X2, 20X3, 20X4, and 20X5? Assume 6% of the restricted stock grants are forfeited during 20x4. What is the journal entry that Buff McGuff will record on December 31, 20X1? What are the two journal entries that Buff McGuff will record on the vesting date, December 31, 20X5?

Answer rating: 100% (QA)

Answer a Buff McGuff will recognize stock compensation expense of 120000 in 20x1 144000 in 20x2 1728... View the full answer