Question 1

On January 1, 2024, Adams-Meneke Corporation granted 120 million incentive stock options to division managers, each permitting holders to purchase one share of the company's $1 par common shares within the next six years, but not before December 31, 2026 (the vesting date).

The exercise price is the market price of the shares on the date of grant, currently $42 per share.

The fair value of the options, estimated by an appropriate option pricing model, is $3 per option.

Management's policy is to estimate forfeitures.

No forfeitures are anticipated.

Ignore taxes.

Required:

Determine the total compensation cost pertaining to the options on January 1, 2024.

Prepare the appropriate journal entry to record compensation expense on December 31, 2024.

Unexpected turnover during 2025 caused an estimate of the forfeiture of 10% of the stock options.

Prepare the appropriate journal entrys) on

December 31, 2025 and 2026 in response to the new estimate.

1. total compensation cost
2. record compensation expense on December 31.2024
3. record the compensation expense

Question 2

Martinez Audio Visual Incorporated offers an incentive stock option plan to its regional managers. On January 1, 2024, options were granted for 56 million $1 par common shares.

• The exercise price is the market price on the grant date$9 per share.
• Options cannot be exercised prior to January 1, 2026, and expire December 31, 2030.
• The fair value of the 56 million options, estimated by an appropriate option pricing model, is $1 per option.

Required:

1.Determine the total compensation cost pertaining to the incentive stock option plan.

2. to 5.Prepare the appropriate journal entries to record compensation expense on December 31, 2024 and 2025. Prepare the appropriate journal entry to record the exercise of 75% of the options on March 12, 2026, when the market price is $10 per share and the entry on December 31, 2030, when the remaining options that have vested expire without being exercised.

a total compensation exoense

brecord comoensation expense on december 31,2024

Question 3