Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On October 15, 2020, the board of directors of Ensor Materials Corporation approved a stock option plan for key executives. On January 1, 2021, 33

On October 15, 2020, the board of directors of Ensor Materials Corporation approved a stock option plan for key executives. On January 1, 2021, 33 million stock options were granted, exercisable for 33 million shares of Ensor's $1 par common stock. The options are exercisable between January 1, 2024, and December 31, 2026, at 80% of the quoted market price on January 1, 2021, which was $10. The fair value of the 33 million options, estimated by an appropriate option pricing model, is $4 per option. Ensor chooses the option to recognize forfeitures only when they occur. Ten percent (3.3 million) of the options were forfeited when an executive resigned in 2022. All other options were exercised on July 12, 2025, when the stocks price jumped unexpectedly to $32 per share. Required: 2. Determine the compensation expense for the stock option plan in 2021. (Ignore taxes.) 3. Prepare the journal entries to reflect the effect of forfeiture of the stock options on Ensors financial statements for 2022 and 2023. 5. Prepare the journal entry to account for the exercise of the options in 2025.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Options Futures And Other Derivatives

Authors: John Hull

9th Global Edition

1292212896, 9781292212890

More Books

Students also viewed these Accounting questions

Question

Compute the derivative of f(x)cos(-4/5x)

Answered: 1 week ago

Question

Discuss the process involved in selection.

Answered: 1 week ago

Question

Differentiate tan(7x+9x-2.5)

Answered: 1 week ago

Question

Explain the sources of recruitment.

Answered: 1 week ago

Question

Differentiate sin(5x+2)

Answered: 1 week ago