On December 31, 2017, Santiago Inc.'s ordinary shares were selling for P55 per share. On this date,

the company creates a compensatory share option plan for its 70 employees. The plan document

states that each employee may purchase 500 shares of its P20 par ordinary shares for P35 per share

after one year if revenues reach P15M, after 2 years if revenues reach P18M, or after three years if

revenues reach P20M. On this date, based on a reliable option pricing model, Santiago Inc. estimates

that each option which can be exercised up to 2022 under the condition that the employee is still

within the employ of the company, has a fair value of P18.

The company has experience a stable 25% increase in revenues for the past 5 years and reasonably

expects the same trend for the upcoming years.

The following information are available from the company's records:

Year Actual

Revenues

Earned

Remaining

employees

at year end

Expected

additional

employee

resignation

2018 P14.5M 68 8

2019 17.5M 65 5

2020 20.5M 63 -

Forty-five employees exercised their vested options on June 15, 2021 while three employees resigned

on the same year without exercising their options, thus were forfeited.

Required:

59. What is the compensation expense related to the share option plan to be recognized in the 2018

financial statements?On December 31, 2017, Santiago Inc.'s ordinary shares were selling for P55 per share. On this date,

the company creates a compensatory share option plan for its 70 employees. The plan document

states that each employee may purchase 500 shares of its P20 par ordinary shares for P35 per share

after one year if revenues reach P15M, after 2 years if revenues reach P18M, or after three years if

revenues reach P20M. On this date, based on a reliable option pricing model, Santiago Inc. estimates

that each option which can be exercised up to 2022 under the condition that the employee is still

within the employ of the company, has a fair value of P18.

The company has experience a stable 25% increase in revenues for the past 5 years and reasonably

expects the same trend for the upcoming years.

The following information are available from the company's records:

Year Actual

Revenues

Earned

Remaining

employees

at year end

Expected

additional

employee

resignation

2018 P14.5M 68 8

2019 17.5M 65 5

2020 20.5M 63 -

Forty-five employees exercised their vested options on June 15, 2021 while three employees resigned

on the same year without exercising their options, thus were forfeited.

Required:

59. What is the compensation expense related to the share option plan to be recognized in the 2018

financial statements?

a. 315,000 c. 207,000

b. 270,000 d. 90,000

60. What is the balance of the additional paid-in-capital account related to the share options as of

December 31, 2020?

a. 207,000 c. 567,000

b. 540,000 d. 630,000

61. What is the balance of the ordinary share options outstanding account as of December 31, 2021.

a. 135,000 c. 270,000

b. 162,000 d. 405,000

62. What is the resulting Share premium from the issuance of shares from the exercise of the

employee options.

a. 405,000 c. 742,500

b. 432,000 d. 877,500

On January, 2018, Pandora Corp. granted to 600 employees, 100 share options each exercisable after

3 years, subject to the employees staying with the company until the end of 2020. Options can be

exercised (at a rate of four options to one share) if share price increases from P40 at the beginning of

2018 to above P60 at the end 2020. The exercise price is P32 (par value P10). The share options can

be exercised at any time during the next five years, that is by the end of 2021. The company

estimates the fair value of the share options on the grant date at P5 per option. This estimate takes

into account the possibility that the share price will exceed P60 per share at the end of 2020, thus

options are exercisable and the possibility that the share price will not exceed P60 at the end of 2020,

thus the share options will be forfeited.

The following information are deemed relevant:

Fair value

of Shares

Fair

value of

Options

Actual number of

employees actually

leaving the company

during the year

Estimated number of

additional employees

expected to leave the

company by the end

of 2020

Dec. 31. 2018 P48 P4 5 45

Dec. 31, 2019 44 3 20 35

Dec. 31, 2020 56 0 30 -

Requirements:

63. What is the ordinary share options outstanding as of December 31, 2019?

a. 180,000 b. 191,667 c. 188,333 d. none

64. What is the compensation expense in 2020?

a. 92,500 b. 91,667 c. 88,333 d. none

65. What is the effect to total APIC assuming that 60% of the options ultimately becoming

exerciseable by the end of the vesting period were eventually exercised?

a. 163,500 b. 343,500 c. 179,850 d. 251,600

On January, 2018 Jubee Corp. grants each of its 100 employees in the sales department share

options. The share options will vest at the end of 2020, provided that the employees remain in the

entity's employ and provided that the volume of sales increases by at least an average of 5% per

year. If the sales volume increase by an average of 5% to 10% per year, each employee will receive

100 options each. If sales volume increase by 11% to 15%, each employee will receive 200 options

each. If sales volume increases by more than 15%, each employee will receive 300 options each. Each

option can be exercised to acquire ordinary shares (P100 par) at P120 per share at any time up to

December 31, 2021.

On the grant date, the company estimates that the share options have a fair value of P40 per option.

The company also estimates that the volume of sales for the product will increase by an average of

11% to 15% per year. The entity also estimates, based on weighted probability that 20% of the

employees will leave before the end of 2020.

By the end of 2018, seven employees have left the company and the entity still estimates that a total

of 20 employees will leave by the end of 2020. Product sales have increased by 12% and the entity

expects that this rate will continue over the next 2 years.

By the end of 2019, further five employees left the company. The entity now expects due to low

turnover that 15% of employees will leave by the end of 2020. Product sales increased by 20% and

expects the same increase in 2020.

By the end of 2020, additional two employees left. The entity sales have increased by 16% in 2020.

66. What is the compensation expense in 2018?

a. 640,000 b. 213,333 c. 466,667 d. 352,000

67. What is the compensation expense in 2020?

a. 640,000 b. 213,333 c. 466,667 d. 352,000

68. Assuming that 60% of the options granted to employees were exercised, the entry to record the

exercise shall require a credit share premium at:

a. 928,800 b. 925,200 c. 309,600 d. 306,000