On October 15, 2015, the board of directors of Ensor Materials Corporation appro
ID: 2593719 • Letter: O
Question
On October 15, 2015, the board of directors of Ensor Materials Corporation approved a stock option plan for shares of Ensor's $1 par common stock. The options are exercisable between January 1, 2019, and December 31, 2021, at 90% of the quoted market price on January 1, 2016, which was $10. The fair value 2.8 million options were forfeited when an executive resigned in 2017. All other options were exercised on July 12, 2020, when the stock's price jumped unexpectedly to 526 per share. Required: 1. When is Ensor's stock option measurement date? O January 1, 2019 O January 1, 2016 O December 31, 2021 OOctober 15, 2015 answer in millions (i.e, 10,000,000 should be entered as 10).) Compensation expense millionExplanation / Answer
1.What is ensor’s stock option measurement date?
January 01, 2016
2.Determine the compensation expense for the stock option plan in 2016.
options granted * fair value of option
28 million * $6 per option = $168 million
Total compensation expense should be allocated for three year of service
$168million/3years = $56 million per year
3.Record the compensation expense for the year December 2018
Forfeited share percentage = 2.8million/28 million = 10%
Remaining percentage of shares un forfeited = 100%-10% = 90%
2017: [$168million*2/3 *90%] - $56 =44.8 million
2018: [$168milion *3/3*90%] -$56- $44.8 = 50.4 million
Journal entry will be on dec 2018
Compensation expense……………………………….. 50.4 million
Paid in capital stock options 50.4 million
4.Record the exercise of options in 2020
[28million-2.8million]*10*90% = 226.80 million
cash……………………………………. ………………$226.80 million
Paid in capital-stock options…………………$151.20 million
Common stock $25.2 million
Paid in capital – excess of par $148.80 million
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