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Heidi Software Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, the company granted options on January
Heidi Software Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, the company granted options on January 1, 2024, that permit executives to acquire 4 million of the companys $1 par common shares within the next five years, but not before December 31, 2025 (the vesting date).
- The exercise price is the market price of the shares on the date of grant, $14 per share.
- The fair value of the 4 million options, estimated by an appropriate option pricing model, is $3 per option.
- No forfeitures are anticipated.
- Ignore taxes.
Required:
- Determine the total compensation cost pertaining to the options.
- Prepare the appropriate journal entry to record the award of options on January 1, 2024.
- Prepare the appropriate journal entry to record compensation expense on December 31, 2024.
- Prepare the appropriate journal entry to record compensation expense on December 31, 2025.
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