At January 1, 2018, universal communications grants options that permit key exec

Question

At January 1, 2018, universal communications grants options that permit key executives to acquire 10 million of the company's $1 par common shares within the next 8 years for $35 per share, but not before January 1, 2022. The fair value of the total compensation expense on the grant date, estimated by an appropriate option-pricing model, is $80 million. 4. What amount should it recognize as compensation expense for 2018? A.$0 B.$10 million C. $20 million D. $90 million 5. Half the options (five million shares) are exercised on July 11, 2018, when the market price is $50 per share. What amount should it charged to the paid-in capital in excess of par on July 11, 2018? A. $5 million B. $45 million C. $90 million D. $210 million

Explanation / Answer

4 Total estimated compensation expense 80 millions Number of year 4 Compensation expense per year 20 So correct answer is C 20 million 5 Total options 10 Million Options exercised 0.5 Option exercised 5 Market price 43 (35+80/10) Total value 215 (5*35+40) Amount added to common stock 5 Paid in capital in excess of par 210 So correct answer is D

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.