Question
On January 1, Year 1, LL Company issued 100 stock options with an exercise price of $18 each to five employees (total 500 options). The
On January 1, Year 1, LL Company issued 100 stock options with an exercise price of $18 each to five employees (total 500 options). The options vest on December 31, Year 2, after the employees have completed two years of service. LL expects that all employees vest in the options.
| Date | Share Price | Fair value of option |
| Jan. 1, Year 1 | $21 | $12 |
| December 31, Year 1 | $21 | $13 |
| December 31, year 2 | $30 | $15 |
A. Assume that this is the equity-settled share-based transaction. Please make all necessary journal entries from Jan. 1, Year 1 to December 31, Year2.
B. Assume that this is the choice-of-settlement share-based transaction, in which the employees can choose to settle the options either (1) in shares of stock or (2) in cash. The option fair value of cash-settlement is equal to the fair value of equity-settlement. Please make all necessary journal entries from Jan. 1, Year 1 to December 31, Year 2 if all employees choose the share settlement.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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