Homework Answers
Solution:
1) The measurement date is always the grant date on 1st January 2018, 38 million stock options were granted.
2)Determine the compensation expense for the stock option plan in 2018
Estimated fair value per option 3
Options granted 38 million
Fair value of award 114
The total compensation is to be allocated to expense over the three year service(vesting) period;million per year
2021-2023 $114 / 3 years = $38 million per year
3)
Prepare necessary journal entries
| Year | Account title & explanation | Debit | Credit |
| 2019 | Compensation expense(114*80%*2/3)-38 | 22.8 | |
| Paid in capital - stock option | 22.8 | ||
| 2020 | Compensation expense(114*80%*3/3)-22.8-38 | 31 | |
| Paid in caapital - stock option | 31 |
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