ty UTD CSecure httpnewconnectmheducstion.com/fow/connect.htm Cnapter 19 Help Sav
ID: 2526149 • Letter: T
Question
ty UTD CSecure httpnewconnectmheducstion.com/fow/connect.htm Cnapter 19 Help Save&Exit; Submit Check my work On October 15, 2017 the board of drectors of Ensor Materials Corporatin approved a steck option plan for key execulives. 0n January 1, 2018, 26 milion stock options were grantcd, cxercisable for 26 million shares of Ensors $1 par common stock. The options are exercisable between January 1, 2021, dnd December 31, 2023, al 80%?f the quated market price ori lenuary 1, 2018, which was 520. I ne tair value of the 26 million ootions, estimated by an ap "Opriate option pricing model. ?S S6 per option. Ensor cnooses the aprion tn rerie forfritures only when they oceur pont All other options were exercised on July 12, Ten percent(2.6 mllllon?of the options were forfeited when an executive resigned in 2015 2022, when the stack's prce jumped urtexpectedly to $25 per share 1. When is Ensors stock option measurement date? 2. Determine the comoensatlon cxpense for the stock option pan In 2018, llgnore taxes) 3. & 5. Prepare the riecessary jaurial entres Complete this question by entering your answers in the tahs below. RoA 1 and 2 Rcq 3 and 3 hen is Enser's stock option measurement date2 Detemine the compensation erpenee for the stock eption plan in 2018. Ignore taxcs.) (Enter your anawer in millions (.a., 10,000,000 zhould be entered as 10).) 1. Stock option date ary 1. 2010 Req 3 and 5> arch ViindowsExplanation / Answer
Question 1
The measurement is generally the date on which the no. of stock options as well as the option price is known. The option purchase price (80% of $20) as well as the number of options(26M) is known on 1 January 2018. Hence the measurement date is :
1st January 2018
Question 2
The Total Compensation expense is calculated as(Number of Stock options granted X Fair Value of options)
= $26Million X $6 = $156M
The Expected period of benefit is the vesting period which is 3 years.
In 2018, the amount of expense to be recognized is the Total Compensation expense/Benefit Period
Hence the expense to be recognized in 2018 is $156/3 = $52M
Question 3
31 Dec 2018
31 Dec 2019
Since 10% of the options are forfieted in 2019, the revised expense estimate is $156 X 0.9 = $140.4M.
Of this $52M has already been provided for in 2018, and hence 140.4M - 52M = 88.4M needs to be expensed over 2019 and 2020. Hence the expense for each of these years is 88.4/2 = $44.1M
31 Dec 2020
12 Jul 2022
On the exercise date, the directors would need to pay the Company 26M X 90% X $16 per share(Exercise Price) = $374.4M
The Total balance in Stock Option Account is $140.4M and the Par Value of the Stocks is $23.4M. Hence the entry to be passed on exercise is:
Debit Credit Compensation Expense 52M Paid-in Capital - Stock Options 52MRelated Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.