Question

8) Given the following information, record the following journal entries using the fair value method. XYZ Corporation issued stock option grants to employees on 1/1/18. The grants allowed the employees to purchase 10,000 shares of S1 par value common stock after a 5-year vesting period but before 10 years from the grant date. The exercise price was $ 75, the market price at the grant date was $100, and the fair market value of the options was $30. a) Grant date b) Compensation expense, if any. c) Compensation expense, if any, for 2019 d) Exercise of 5,000 options on 6/30/2023 e) Expiration of the remaining 5,000 in 2027.

Answer 1

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Naming convention is not available, can be slightly different: Solution: Debit Credit $ - $ 60,000 $ 60,000 $ 60,000 Journal Entries Date Account title and explaination 1/1/2018 No Entry No Entry (No entry is recorded on Grant date) 12/31/2018|Compensation Expense (10000*30)/5 Paid-in Capital - Stock Options (To record compenstion expense for 2018) 12/31/2019 Compensation Expense (10000*30)/5 Paid-in Capital - Stock Options (To record compenstion expense for 2019) 6/30/2023 Cash (5000*75) Paid-in Capital - Stock Options (5000*30) Common Stock (5000*1) Paid in Capital in Excess of Par (plug) (To record the exercise of stock option) 12/31/2027 Paid-in Capital - Stock Options (5000*30) Paid-in Capital - Expired Stock Options (To record lapse of options) $ 60,000 375000 150000 5000 520000 150000 Exact date is missing: 150000