Question

On January 1, Year 1, Kiwi Computers Corp granted options to its new CEO, Morgan Price, to purchase 50,000 shares of $1.00 par value common stock for $30.00 per share. The options are exercisable after December 31, Year 3 and expire on March 31, Year 4. On the grant date, the market price of the stock was $25.00 per share. Using an acceptable valuation model, Kiwi determined that the options had a fair value of $150,000 on the grant date. The options serve as compensation for services rendered during the first three years.

A В C Credit 1 Account Debit 123 123 2 123 123 3 123 123 123 123 5 !!!

Please if I can get answer in the table so I can see and understand.

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Answer 1

ANSWER

A C D E F G J K H L 7Par value per share 8 Option excercisable after 1.00 Dec 31Year 3) 9 Option valid till 31March Year 4) Options fair value at grant date $ 150,000 11 Option serves as a compensation for services rendered during first 3 years 13 1Journal Entry on grant date There will not be any journal entry on grant date as it is offered as a compensation for service offered starting from grant date Since on grant date there is no service offered, there vill not be any journal entry. 14 15 16 17 2) Since fair value of option is $1,50,000 for three year of compensation therefore each year compenasation expense will be charged at $50,000 each year Dec 31Year Debit Credit 19 Compensation Expense ($150,000/3 years) 50,000 20 Additional Paid-In capital Stock options $50,000 21 22 Dec 31Yearl Compensation Expense ($100,000/2 years) $ 50,000 23 Additional Paid-In capital Stock options $50,000 24 25 Dec 31Year1 Compensation Expense ($50,000/1 years) $ 50,000 26 Additional Paid-In capital - Stock options $50,000 27 3) Fraction of option excercised 28 50% 29 30 Jan1Year4 Cash $ 750,000 75,000 31 Additional Paid-In capital - Stock options $ 32 Common Stock Additional Paid-In capital - Common Stock $25,000 33 ###### 34 4) Fraction of option not excercised Jan1Year4 35 50% 36 37 75000 Additional Paid-In capital - Stock options 38 Additional Paid-In capital - Expired Stock options 75000 39 40

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