Howell Company began business on March 1, 2017.At that time, it granted 250,000

Question

Howell Company began business on March 1, 2017.At that time, it granted 250,000 options, with a strike price of $5, to computer engineers in lieu of signing bonuses. The fair value of each option was estimated at $1 and the options vest over four years.

What is the total expense that the company will record associated with the options granted in 2017?

What will Howell record in 2017 for stock-option compensation expense?

How will the exercise of the options impact the balance sheet, income statement, and statement of cash flows?

Explanation / Answer

a) Total Expenses = 250,000 options x $1 fair Value = $250,000
b) Stock option compensation Expenses = $250,000/4 = $62,500
c) Excercising Option will reduced the Diluted Earning per share in Income statement
Balance Sheet = On the excercise date employee purchased the stock option at exercise price it will increase the cashand will be debited. If the stock sold above the par value then additional paid in capital will increase and will be credited and common stock will be credited with the par value .
Cash flow statement - It will accounted under financing activities.

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