TOPIC: Shared based compensation, SAR and Employee Benefits

Please select the best option & present your solution. Thank you.

1. In connection with a stock option plan for the benefit of key employees, ABC Co. intends to distribute treasury shares when the options are exercised. These shares were bought in 20x3 at P42 per share. On January 1, 20x4, ABC Co. granted stock options for 100,000 shares at P38 per share as additional compensation for services to be rendered over the next 3 years. The options are exercisable during a 2-year period beginning January 1, 20x7, by grantees still employed by ABC Co. Market price of the ABC Co.'s stock was P47 per share at the grant date. The fair value of the stock option is P12 on grant date. No stock options were terminated during 20x4. Compute the amount of expense that should be recognized for 20x4.

2. On June 30, 2019, New York Company granted compensatory share options for 30,000 P20 par value ordinary shares to certain key employees. The market price of the share on that date was P36 and the option price was P30. The Black-Scholes option pricing model measured the total compensation expense to be P5,400,000. The options are exercisable beginning January 1, 2022, provided the key employees are still in entity's employ at the time of the options are exercised. The options expire on June 30, 2023. On January 15, 2022, when the market price of the share was P42, all 30,000 options were exercised. What amount shall be recognized as share premium upon exercise of the share options in 2022?

A. 5,700,000

B. 5,400,000

C. 4,620,000

D. 300,000

E. answer not given

3. On January 1, 2019, Nevada Company granted share options to each of the 300 employees working in the sales department. The share options vest at the end of a 3-year period provided that the employees remain the entity's employ and provided the volume of sales will increase by more than 10% per year. The fair value of each share option on grant date is P30. The par value per share is P50 and the option price is P60.If the sales increase by more than 10%, each employee will receive 200 share options. If the sales increase by more than 15%, each employee will receive 300 share options. On December 31, 2019, the sales increased by more than 10% but not more than 15% and no employees have left the entity. On December 31, 2020, sales increased by more than 15% and no employees have left. On December 31, 2021, the sales increased by more than 15% and 50 employees left the entity. All of the share options were exercised on December 31, 2021. What amount should be recognized as compensation expense for 2021?

A. 2,250,000

B. 1,200,000

C. 900,000

D. 450,000

E. answer not given

4. Lion Company granted 30,000 share appreciation rights which entitled key employees to receive cash equal to the difference between P20 and the market price of the share on the date each right is exercised. The service period is 2019 through 2021, and the rights are exercisable in 2022. The market price of the share was P25 and P28 on December 31, 2019 and 2020, respectively. How much should be recorded as compensation expense for 2020?

A. 150,000

B. 120,000

C. 110,000

D. 10,000

E. answer not given

5. Copenhagen Company granted 200 share appreciation rights to each of the 500 employees on January 1, 2016. The rights are due to vest on December 31, 2019 with payment being made on December 31, 2020. Only 80% of the awards vest. January 1, 2016 (predetermined price)150 December 31, 2016 : 180 December 31, 2019 : 210 December 31, 2020 : 190 What amount should be recognized as gain on reversal of share appreciation rights on December 31, 2020?

A. 3,200,000

B. 2,000,000

C. 1,600,000

D. 0

E. answer not given