Question
On January 1, 2019, Hooper Hardware Company established a stock-based compensation plan (non-qualified plan) for its senior employees. A total of 75,000 options were granted
On January 1, 2019, Hooper Hardware Company established a stock-based compensation plan (non-qualified plan) for its senior employees. A total of 75,000 options were granted that permit employees to purchase 75,000 shares of $2 par common stock at $38 per share. Each option was valued at $6 on the grant date using the Black/Sholes option pricing model. Options are exercisable beginning on January 1, 2022 and can be exercised anytime during 2022 through 2024. The market price for Hooper common stock on January 1, 2019, was $38. The options vest on a straight-line basis over the years 2019 through 2021. Assume none of the senior employees terminate their employment or otherwise forfeit their options through the end of 2021.
What are the proper book accounting journal entries that should be recorded in each 2019 through 2021 to properly record compensation expense throughout the service period?
Prepare the appropriate deferred tax entries for each year 2019 through 2021 associated with these options assuming the future tax rate is expected to be 21% for all years.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started