Question
Correct or provide the journal entries: In addition to selling the preferred shares to the CEO, on January 1, 20X0, the company also granted her
Correct or provide the journal entries:
In addition to selling the preferred shares to the CEO, on January 1, 20X0, the company also granted her 800,000 stock options. Each option gives the holder the right to buy one common share at $5 each. The options are compensation arising from the signing of a two-year employment contract at the beginning of the year. Half of the options vest on December 31, 20X0 while the other half vest one year later. The accountant recorded no entries for these options because the CEO has not exercised any of them. You have performed some preliminary calculations of the fair value of these stock options using the Black Scholes model and have determined that on January 1, 20X0 the fair value of the 1-year options was $4 while the fair value for the 2-year options was $5 each. By December 31, 20X1 these values were $6 and $7 respectively.
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