Q3. Gimble Inc. granted 100 stock options to its key employees on 1/1/2020. The options vest after a 3- year service period and had a total grant-date fair value of $900. Each option has an exercise price of $20. During the second year of the service period, several employees left the company and thereby forfeited options with an original total grant-date fair value of $144. In the fourth year, after the options vested, Mary Lock exercised options with a grant-date fair value of $135 for common shares with a current FMV of $25 per share. (Note: Gimble common stock has a par value of $1 per share.) a. Determine the total option-related compensation expense that was reported by Gimble in (0) year 1 of the service period and (ii) year 2 of the service period. Show calculations. Answer: Year 1 Year 2 b. Make the journal entry for the exercise of the options in the fourth year. Show supporting calculations. c. What was the aggregate intrinsic value of the options exercised by Mary Lock? (ii) What was the aggregate three-year compensation expense attributable to those options? Show supporting calculations. d. Assume that options with a grant-date fair value of $300 were never exercised and, as a result, expire worthless after five years. Discuss the accounting for this situation. Q3. Gimble Inc. granted 100 stock options to its key employees on 1/1/2020. The options vest after a 3- year service period and had a total grant-date fair value of $900. Each option has an exercise price of $20. During the second year of the service period, several employees left the company and thereby forfeited options with an original total grant-date fair value of $144. In the fourth year, after the options vested, Mary Lock exercised options with a grant-date fair value of $135 for common shares with a current FMV of $25 per share. (Note: Gimble common stock has a par value of $1 per share.) a. Determine the total option-related compensation expense that was reported by Gimble in (0) year 1 of the service period and (ii) year 2 of the service period. Show calculations. Answer: Year 1 Year 2 b. Make the journal entry for the exercise of the options in the fourth year. Show supporting calculations. c. What was the aggregate intrinsic value of the options exercised by Mary Lock? (ii) What was the aggregate three-year compensation expense attributable to those options? Show supporting calculations. d. Assume that options with a grant-date fair value of $300 were never exercised and, as a result, expire worthless after five years. Discuss the accounting for this situation
