Fixed Share Option Compensation Plan Instructions Chart of Accounts General Journal Balance Sheet Instructions On January 1, 2016, Roswall Corporation's common stock is selling for $55 per share. On this date, Roswall creates a compensatory share option plan for its 60 key employees. The plan document states that each employee may purchase 500 shares of its $10 par common stock for $55 per share after working for the company for 3 years. On this date, based on an option pricing model, Roswall estimates that each option has a value of $18. Roswall expects that employee turnover rate will be 15% over tre service period. Because of lower tumover atte end of 2017, Roswall changes its estimated turnover rate to 12% for the entire servce period. At the end of 2018, te options vest for 5k employees. On January 13, 2019, 10 executives exercise their options when the stock is selling for $75 per share. Required: 1. Prepare a schedule of Roswall's compensation computations for its compensatory share option plan for 2016 through 2018. 2. Prepare Roswall's memorandum entry for the grant date and journal entries for 2016 through 2019 in regard to this plan. 3. Show how the account(s) related to the plan is (are) reported in the shareholders' equity section of Roswall's balance sheet on December 31, 2017. Prepare Roswall's memorandum entry for the grant date and journal entry on December 31, 2016 in regard to this plan. Additional Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF DEBIT CREDIT Prepare Roswall's memorandum entry forthe arant date and iournal entryon Decermber 31.201 Zin regard to this olan. Additional-instructions ROSWELL CORPORATION Compensatory Share Option Plan 2016 through 2018 2016 2017 2018 Estimated (actual) total compensation cost Fraction of service period expired Estimated compensation expense to date Previously recognized compensation expense Current compensation expense 2 3 1/3 2/3 3/3 4 5 6 Fixed Share Option Compensation Plan Instructions Chart of Accounts General Journal Balance Sheet Instructions On January 1, 2016, Roswall Corporation's common stock is selling for $55 per share. On this date, Roswall creates a compensatory share option plan for its 60 key employees. The plan document states that each employee may purchase 500 shares of its $10 par common stock for $55 per share after working for the company for 3 years. On this date, based on an option pricing model, Roswall estimates that each option has a value of $18. Roswall expects that employee turnover rate will be 15% over tre service period. Because of lower tumover atte end of 2017, Roswall changes its estimated turnover rate to 12% for the entire servce period. At the end of 2018, te options vest for 5k employees. On January 13, 2019, 10 executives exercise their options when the stock is selling for $75 per share. Required: 1. Prepare a schedule of Roswall's compensation computations for its compensatory share option plan for 2016 through 2018. 2. Prepare Roswall's memorandum entry for the grant date and journal entries for 2016 through 2019 in regard to this plan. 3. Show how the account(s) related to the plan is (are) reported in the shareholders' equity section of Roswall's balance sheet on December 31, 2017. Prepare Roswall's memorandum entry for the grant date and journal entry on December 31, 2016 in regard to this plan. Additional Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF DEBIT CREDIT Prepare Roswall's memorandum entry forthe arant date and iournal entryon Decermber 31.201 Zin regard to this olan. Additional-instructions ROSWELL CORPORATION Compensatory Share Option Plan 2016 through 2018 2016 2017 2018 Estimated (actual) total compensation cost Fraction of service period expired Estimated compensation expense to date Previously recognized compensation expense Current compensation expense 2 3 1/3 2/3 3/3 4 5 6
