Sams Kennel Corp (SKC) maintains an employee stock option plan for its senior executive. On January 1,
Question:
Sam’s Kennel Corp (SKC) maintains an employee stock option plan for its senior executive. On January 1, 2021, SKC awarded its employees a total of 20,000 options that are first exercisable on January 1, 2025. Each option, which expires on December 31, 2029, enables the employees to buy one common share of SKC, which was trading at $20 on the grant date. On the grant date, SKC estimated the fair value of the options to be $5 each.
SKC reports its financial results in accordance with IFRS. It has a December 31 year-end. Estimated and actual forfeiture rates appear below:
On January 31, 2025, when the company stock was trading at $32 and the fair value of the options was $15 each, employees exercised 12,000 of the stock options.
Required:
Prepare journal entries to record compensation expense for each of December 31, 2021, 2022, 2023, and 2024, and the exercise of the stock options on January 31, 2025.
Step by Step Answer:
To calculate the compensation expense for the stock options we will use the fair value method Under this method the compensation expense is equal to t...View the full answer
