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Question 4 (16 marks) On January 1st, 20x9, GHI Inc. granted options to its twenty employees allowing for the purchase of 12,000 shares at $5
Question 4 (16 marks) | |||||||||||
On January 1st, 20x9, GHI Inc. granted options to its twenty employees allowing for the purchase of 12,000 shares at $5 per share. The options vest evenly over the 3 years following the date of issue. The options are only exercisable as of December 31st, 20x11. The fair value of these options (using an Option Pricing model) is $30,000. | |||||||||||
Provide the required journal entries to record the accrual of compensation expense and the exercise of the options and | |||||||||||
Suppose that some of the options were forfeited by the employees. Actual and estimated forfeiture data are provided in the table below: | |||||||||||
Year | 1 | 2 | 3 | ||||||||
Total employees | 20 | 20 | 20 | ||||||||
Employees expected to forfeit | 2 (10%) | 4 (20%) | |||||||||
Employees expected to remain until vesting | 18 (90%) | 16 (80%) | |||||||||
Employees actually forfeiting in the year | 1 | 2 | 0 | ||||||||
Employees receiving options | 17 |
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