Question
2 . Prepare the necessary entries from 1/1/20-2/1/22 for Garr. Co. for the following events using the fair value method. If no entry is needed,
2. Prepare the necessary entries from 1/1/20-2/1/22 for Garr. Co. for the following events using the fair value method. If no entry is needed, write "No Entry Necessary."
On 1/1/20, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 30,000 shares of common stock at $40 per share. The par value is $10 per share.
On 2/1/20, options were granted to each of five executives to purchase 30,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/22. It is assumed that the options were for services performed equally in 2020 and 2021. The Black-Scholes option pricing model determines total compensation expense to be $3,200,000.
At 2/1/22, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started