Project 2.4 Topic: Equity Transactions and Equity-based Compensation On 1/1/20X1, llini has 20,000 shares of $1 par common stock outstanding. On 1/1/20X1, lllini Company's executives have 1,000 vested stock options that were awarded as compensation before. These options permit them to buy 1,000 shares of the lllini's $1 par value common stock at an exercise price of $10. The fair value of these options on the original option grant date was estimated at $4 each. o During 20X1 lllini Company reacquires 1,500 common shares as treasury shares as follows: A4/1/20%1 300 shares at $10 each TI120%1 400 shares at $15 each 10/1/720X1 800 shares at $20 each o On April 1, 20X1, lllini issued 1,000 shares of $100 par value 8% convertible cumulative preferred stock. The shares are sold at par value. These shares are convertible into 2,000 common shares. Mo dividends are declared in 20X1. On January 1, 20X2, the stock price is $18 per share, and 500 options are exercised. Assume that lllini reissues treasury shares to satisfy the executives' exercise of options, and that it is using the first-in first-out cost flow method. The average stock price in 201 and 20X2 are the same at $16 per share. Assume that there is a zero balance in the APIC- treasury stock account on 1/1/20X1. o During 20X2, lllini Company also has the following transactions: e Feb 1: Issues 1,000 shares of commaon stock for $15 per share. April 1: Issues 1,000 shares of common stock in exchange for the right to use a competitor's brand when marketing its products. The stock trades at $16 per share on April 1, 20X2, and independent experts put the value of the brand between $10,000 and $20,000. Please use "brand asset\" to record the right. * September 1: Re-issues the remaining 1,000 shares of treasury stock at $16 per share, originally acquired in 20x1. o October 1: Has a 2-for-1 stock split effected in a 100% stock dividend on all outstanding common shares on this date. Hint: record the transaction at the par value of the stock. Assume that the conversion ratios for outstanding convertible bonds and convertible preferred stock would double after the 2-for-1 stock split. o December 31: Declares and pays cash dividends to both preferred and common stockholders. The dividends to common stockholders are 10 cents per share. Project 2.4 Ledger Date Account Name Debit Credit 4/1/20X1 Treasury stock 3,000[A] Cash 3,000 B] 7/1/20X1 Treasury stock 6,000[C] Cash 6,000[D] 10/1/20X1 Treasury stock 16.000 8 Cash 16,000 [F] 4/1/20X1 Cash 100,000[G] Preferred stock 100,000 H] 1/1/20X2 Cash 5,000 0 APIC - stock options 2,000[J] Treasury stock 6,000[K] APIC- treasury stock 1,000 L] 2/1/20X2 Cash 15,000 M] Common stock 1,000[N] APIC 14,000[0] 4/1/20X2 Brand asset 16,000 [P] Common stock 1,000 Q] APIC 15,000[R] 9/1/20X2 Cash 16,000[S] APIC- treasury stock 1,000 T Retained earnings 2,000 U] Treasury stock 19.000 10/1/20X2 Retained earnings 22,000 W Common stock 22,000[X] 12/31/20X2 Retained earnings 18,400MY Cash 18,400 Z]