On January 1, 2020, ABC Corporation granted an employee an option to purchase 3,000 shares of ABC’s P5 par value ordinary share at P20 each. The option became exercisable on December 31, 2022. The options was exercised on January 10, 2023. The market prices of ABC’s share capital were as follows: January 1, 2020 – P30; December 31, 2020 – P50; December 31,2021 – 55; December 31, 2022 – 65; January 10, 2023 – P75. The company cannot reliably determine the fair value of the share option, so it decided to use the intrinsic method. For the year 2022, how much should ABC recognize as compensation expense?
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On January 1, 2020, ABC Corporation granted an employee an option to purchase 3,000 shares of ABC’s P5 par value ordinary share at P20 each. The option became exercisable on December 31, 2022. The options was exercised on January 10, 2023.
The market prices of ABC’s share capital were as follows: January 1, 2020 – P30; December 31, 2020 – P50; December 31,2021 – 55; December 31, 2022 – 65; January 10, 2023 – P75.
The company cannot reliably determine the fair value of the share option, so it decided to use the intrinsic method.
For the year 2022, how much should ABC recognize as compensation expense?
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- On January 1, 2022, Mills Corp. purchased a call option on shares of XYZ stock. Terms of the contract were as follows: Number of shares: 100 . Strike price: $120 per share Expiration date: April 30, 2022 Total cost of the option contract paid at signing: $90 .Seller of the option contract: First Investment Bank On January 1, 2022, XYZ stock was trading at $120 per share. The following additional information is known: . On March 31, 2022, the price of XYZ stock was $140 per share. A market appraisal indicated that the time value of the option contract was $70. . On April 5, 2022, the price of XYZ stock was $135 per share. A market appraisal indicated that the time value of the option contract was $60. On this date, Mills settled the option contract. Required: 1. Indicate any amounts that Mills Corp. would have included in its March 2022 quarterly financial statements related to the option contract. ed Complete this question by entering your answers in the tabs below. Req 1 Indicate any…Johnstone Co. purchased a put option on Ewing common shares on July 7, 2020, for $240. The put option is for 200 shares, and the strike price is $70. (The market price of a share of Ewing stock on that date is $70.) The option expires on January 31, 2021. The following data are available with respect to the put option. Date Market Price of Ewing Shares Time Value of Put Option September 30, 2020 $77 per share $125 December 31, 2020 75 per share 50 January 31, 2021 78 per share 0 Instructions Prepare the journal entries for Johnstone Co. for the following dates. a. July 7, 2020—Investment in put option on Ewing shares. b. September 30, 2020—Johnstone prepares financial statements. c. December 31, 2020—Johnstone prepares financial statements. d. January 31, 2021—Put option expires.On January 1, 2022, Rosewood Corp. purchased a put option on shares of ICM stock. Terms of the contract were as follows: Number of shares: 100 Strike price: $200 per share Expiration date: May 31, 2022 Total cost of the option contract: $80 Seller of the option contract: First Investment Bank On January 1, 2022, ICM stock was trading at $200 per share. The following additional information is known: On March 31, 2022, the price of ICM stock was $220 per share. A market appraisal indicated that the time value of the option contract was $60. On May 10, 2022, the price of ICM stock was $185 per share. A market appraisal indicated that the time value of the option contract was $50. On this date, Rosewood settled the option contract. What is the dollar value of put option that Rosewood Corp. would have included in its March 2022 quarterly financial statements?
- On January 1, 2022, Rosewood Corp. purchased a put option on shares of ICM stock. Terms of the contract were as follows: Number of shares: 100 Strike price: $200 per share Expiration date: May 31, 2022 Total cost of the option contract: $80 Seller of the option contract: First Investment Bank On January 1, 2022, ICM stock was trading at $200 per share.The following additional information is known: On March 31, 2022, the price of ICM stock was $220 per share. A market appraisal indicated that the time value of the option contract was $60. On May 10, 2022, the price of ICM stock was $185 per share. A market appraisal indicated that the time value of the option contract was $50. On this date, Rosewood settled the option contract. What is the dollar value of put option that Rosewood Corp. would have included in its March 2022 quarterly financial statements?Warren Co. purchased a put option on Echo common shares on January 7, 2020, for $360. The put option is for 400 shares, and the strike price is $85 (which equals the price of an Echo share on the purchase date). The option expires on July 31, 2020. The following data are available with respect to the put option. Date Market Price of Echo Shares Time Value of Put Option March 31, 2020 $80 per share $200 June 30, 2020 82 per share 90 July 6, 2020 77 per share 25 Instructions Prepare the journal entries for Warren Co. for the following dates. a. January 7, 2020—Investment in put option on Echo shares. b. March 31, 2020—Warren prepares financial statements. c. June 30, 2020—Warren prepares financial statements. d. July 6, 2020—Warren settles the put option on the Echo shares.On January 1, 2022, Mills Corp. purchased a call option on shares of XYZ stock. Terms of the contract were as follows: • Number of shares: 100 • Strike price: $120 per share • Expiration date: April 30, 2022 •Total cost of the option contract paid at signing: $90 • Seller of the option contract: First Investment Bank On January 1, 2022, XYZ stock was trading at $120 per share. The following additional information is known: . On March 31, 2022, the price of XYZ stock was $140 per share. A market appraisal indicated that the time value of the option contract was $70. . On April 5, 2022, the price of XYZ stock was $135 per share. A market appraisal indicated that the time value of the option contract was $60. On this date, Mills settled the option contract. Required: 1. Indicate any amounts that Mills Corp. would have included in its March 2022 quarterly financial statements related to the option contract Complete this question by entering your answers in the tabs below. Req 1 Indicate…
- On October 15, 2022, East Company approved a share option plan for key executives. On January 1, 2023, 200,000 share options were granted exercisable for 200,000 ordinary shares at P10 par value. The options are exercisable between January 1, 2026 and December 31, 2028, at 80% of the quoted market price on January 1, 2023 which was P15. The fair value of the 200,000 options estimated by an appropriate option pricing model is P6 per option. Twenty thousand options were forfeited when an executive resigned in 2024. All other options were exercised on July 1, 2026 when the share price jumped unexpectedly to P20.What amount should East Company credit to share premium upon exercise of options in 2026? 1,440,000 1,560,000 2,160,000 1,600,000On January 2, 2020, Ayayai Company purchases a call option for $310 on Merchant common stock. The call option gives Ayayai the option to buy 1,090 shares of Merchant at a strike price of $49 per share. The market price of a Merchant share is $49 on January 2, 2020 (the intrinsic value is therefore $0). On March 31, 2020, the market price for Merchant stock is $53 per share, and the time value of the option is $200. Prepare the journal entry to record the purchase of the call option on January 2, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 2, 2020 enter an account title to record the transaction on January 2, 2020 enter a debit amount enter a credit amount enter an account title to record the transaction on January 2, 2020 enter a debit…On May 1, 2020, Sunco Limited purchased a call option from Moonco Corporation. The option gave Sunco the right to purchase shares in a third company, Galaxy Company. Sunco settled the options in cash on June 16, 2020. Following are additional details pertaining to the option: Number of shares that can be purchased with the call option 7,400 Call option exercise price per share $ 10.03 Market price per share of Galaxy Company on May 1, 2020 $ 10.03 Price paid by Sunco to purchase the option $ 1,800 Market price per share of Galaxy Company on May 31, 2020 $ 11.24 Fair value of call option on May 31, 2020 $ 9,200 Market price per share of Galaxy Company on June 16, 2020 $ 11.29 Fair value of call option on June 16, 2020 $ 8,800 Sunco has a year end of May 31. Required: Prepare the journal entries required on the books of Sunco Limited on each of the…
- On January 1, 2020, The Red Hot Company established a share option plan for its selected senior employees. A total of 30,000 options were granted that permit said employees to purchase 30,000 shares of P 20 par ordinary share capital at P 35 per share. Options are exercisable beginning on January 1,2023 and can be exercised anytime from January 1,2023 through December 31,2024.At January 1, 2020, the market price for the Red Hot Company share option was P 8, based on an option pricing model used by the entity. All, but 2,000 share options were exercised on December 31,2023.REQUIRED:a) Computation of compensation expense for years 2020, 2021 and 2022.b) Entries as a result of the foregoing for year 2020 through 2023, inclusive.On January 1,2020 , Red Day Company granted 80 share options to each of its 400 employees for the purchase of P 100 par ordinary share at P 140 per share. The fair value of each option on this date was P 22. The employees are required to be in the employ of the company at least until the options vested. The share options will vest as follows: End of 2020, if earnings in 2020 increased of 15% End of 2021, if average annual earnings during 2020 would increase by at least 13%. During 2021, reported earnings increased by 12%. The company reported an increase in 2020 earnings by 13%. At December 31,2020, it was expected that earnings during 2020 would increase by at least 13%. During 2021, reported earnings increased by 12%. No employees left the company during the two year period 2020-2021. All options were exercised during 2022. REQUIRED: a.) All entries during 2020 through 2022. b.) Assume that the reported earnings in 2020 increased by 15%. How much compensation expense would be…On August 1, 2023, DMW Ltd. purchased a call option from DDR Investments Corporation. The option gave DMW the right to buy 14,000 shares in a third company, MGL Ltd., at a price of $22.75 per share. On the day DMW purchased the option, MGL shares were trading at $22.75 each. DMW paid $700 for the options. On August 31, 2023, the MGL shares were trading at $27.75 each, and the options for MGL shares were trading at $32,100. On September 15, DMW settled the options in cash when the MGL shares were trading at $29.00 and the options were trading at $87,500. (b) Prepare the journal entries to record the above transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem. List all debit entries before credit entries.)