Case 2: On 1 July 2018, Titan Ltd granted The options vest only if employees con

Question

Case 2: On 1 July 2018, Titan Ltd granted The options vest only if employees continuously provide services to Titan Ltd for a period of four years from the grant date. 250 share options to each of its 450 employees. The exercise price of the options is $6 while the fair value was determined using an option pricing model to be $ 3.90. Options can be excercised any time during the 12 months after the vesting period. On grant date, it was estimated that 60 employees will leave during the vesting period. However, by 30 June 2019 75 20 employees had left and Titan Ltd revised the estiamte of the total employees that would leave to be Another For the year ended 30 June 2021, a further During the least two years, the estimate remained unchanged. 9 left during the yer ending 30 June 2020 and the estiamtes was further revised to a total of 80 12 employees left and in the last year 9 left. During the 12 months after the vesting date, the shapre price was $7.00 and their rights to purcahse shares. At the end of the year, the balance of the options account which represented the unexercised options was transferred into a general reserve 300 employees exercised Required a) Prepare journal entries to account for the share options granted by Titan Ltd for each of the five years in accordance with AASB 2. Show all your workings 10 Marks How would your answer to a) change if three more employees left on 31st December 2022 Provide your reasons b) 3 Marks

Explanation / Answer

1. Journal Entries for Share-Based Payments as per AASB 2

Based on the information provided, the share-based payment expenses as per AASB2 will be computed and recognised for each year as below:

Year 1 ending 30th June, 2019= (450-75) * 250 * 3.90 * 1/4= 91406.25

Salaries & Wages A/c Dr. 91406.25

To Share Payment Reserve A/c 91406.25

Year 2 ending 30th June, 2020 = (450-80)*250*3.90*2/4 less 91406.25= 88968.75

Salaries & Wages A/c Dr. 88968.75

To Share Payment Reserve A/c 88968.75

Year 3 ending 30th June, 2021= (450-80)*250*3.90*3/4 less (91406.25+88968.75)= 90187.50

Salaries & Wages A/c Dr. 90187.50

To Share Payment Reserve A/c 90187.50

Year 4 ending 30th June, 2022= (450-80)*250*3.90 less (91406.25+88968.75+90187.50)= 90187.50

Salaries & Wages A/c Dr. 90187.50

To Share Payment Reserve A/c 90187.50

Year 5 ending 30th June, 2023, for settlement of payments and exercise of option (Assuming par value of share to be $1)

=300*250*6=450000

Cash A/c Dr. 450000

To Equity A/c 75000

To Equity Premium A/c 375000

For transferring the unexercised option to general reserve

(450-20-9-12-9-300)*250*3.90=97500

Salaries & Wages A/c Dr. 97500

To General Reserve A/c 97500

B. Change in Answer

If 3 more employees leave on 31st December , 2022, then the amount to be transferred to General Reserve will be calculated as below:

(450-20-9-12-9-300-3)*250*3.90= 94575

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