On July 1, 2014, Ellison Company granted Sam Wine, an employee, an option to buy
ID: 2422127 • Letter: O
Question
On July 1, 2014, Ellison Company granted Sam Wine, an employee, an option to buy 1,000 shares of Ellison Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $4,500. Wine exercised his option on October 1, 2014 and sold his 1,000 shares on December 1, 2014. Quoted market prices of Ellison Co. stock in 2014 were: July 1 $30 per share October 1 $36 per share December 1 $40 per share The service period is for three years beginning January 1, 2014. As a result of the option granted to Wine, using the fair value method, record the journal entry
Explanation / Answer
July-1 Compensation Expense $1500
Addional Paid in Capital-Stock Options $1500
Oct-1 Cash $30,000
Additional paid in Capital-Stock option $1500
Common Stock(1000*10) $ 10,000
Additional Paid in Capital-Common Stock $ 21500
In Next 2 Years following entry will be passed.
Compensation Expense $1500
Additional Paid in Capital- $1500
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