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Homework Answers
Answer -
1. Answer -
Revised estimated of total compensation = Issue stock option * Fair value
Revised estimated of total compensation = 380000 * $9
Revised estimated of total compensation = $3420000
2. Answer -
Farmer will reverse the 2018 recorded compensation (Because stock option issued on January 1, 2018 therefore compensation expense for year 2018 was calculated)
Calculation :
2018 Compensation expense
= [($3420000 * 1/5) - $0]
= $684000
2019 Compensation expense
= [(3420000 * 2/5) - $684000]
= $684000
2020 Compensation expense
= [(3420000 * 3/5) - $1368000]
= $684000
3. Answer -
Journal entries to record expense compensation in 2019 and 2020
| Date | General Journal | Debit | Credit |
| 2019 | Compensation expense | $684000 | |
| Paid in capital-stock option | $684000 | ||
| 2020 | Compensation expense | $684000 | |
| Paid in capital-stock option | $684000 |
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