Question
On January 1, 2016, Rhine Company adopts a performance-based share option plan for its 80 key executives. Each executive is granted a maximum of 70
On January 1, 2016, Rhine Company adopts a performance-based share option plan for its 80 key executives. Each executive is granted a maximum of 70 share options, but the number of options that vest depends on the percentage increase in Rhines sales over a 3-year service period. If by December 31, 2018, sales have increased by at least 10%, 50 options will vest for each executive; if sales have increased by at least 15%, all 70 options will vest. On the grant date, Rhine estimates that its sales will increase by 12% over the service period, and that its employee turnover rate over the 3-year service period will be 6%. It also determines that the fair value of an option expected to vest is $13.40. At the end of 2018, actual sales had increased by 16% for the service period, and the actual turnover was 6 key executives for the service period.
Required:
1. | Prepare a schedule of Rhines computations for its compensatory share option plan for 2016 through 2018. |
2. | Prepare the compensation expense journal entry for 2016. |
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