On July 1, 2013, Hooker Financial Corporation granted 50,000 options to key exec

Question

On July 1, 2013, Hooker Financial Corporation granted 50,000 options to key executives. Each option allows the executive to purchase one share of Hooker’s $1 par value common stock at a price of $58 per share. The options were exercisable within a 2-year period beginning July 1, 2015, if the grantee is still employed by the company at the time of the exercise. On the grant date, Hooker’s stock was trading at $50 per share, and a fair value option-pricing model determines total compensation to be $350,000. On July 1, 2015, 35,000 options were exercised when the market price of Hooker’s stock was $65 per share. The remaining options lapsed in 2015 because executives decided not to exercise their options. Prepare the necessary journal entries related to the stock option plan for the years 2013 through 2017.

Show all calculations. Show all journal entries.If there is no journal entry, write no entry.

Explanation / Answer

01/07/2013 Employee compensation expenses 350000       To ESOP outstanding 350000 (Being the grant of ESOP) 01/07/2015 Bank 2030000 Esop outstanding 245000    To equity Share capital 35000    To Securities premium 2240000 (Being the allotment of Equity for 35000 options exercised) 01/07/2015 Esop outstanding 105000       To Employee compensation expenses 105000 (Being the entry for lapse of 15000 options) 31/03/2016 Profit and loss account 245000       To Employee compensation expenses 245000 (being transfer of employee compensation expenses to profit and loss account)

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

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