Journalizing Transactions using the Fair Value Method
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Prepare the necessary entries from 1/1/07-2/1/09 for each of the following events using the fair value method. If no entry is needed for an event, write "No Entry Necessary."
[Hint: Remember, there are five different dates involved]
a) On 1/1/07, the stockholders adopted a stock option plan for top executives whereby each might receive rights to purchase up to 12,000 shares of common stock at $40 per share. The par value is $10 per share.
b) On 2/1/07, options were granted to each of five executives to purchase 12,000 shares. The options were non-transferable and the executive had to remain an employee of the company to exercise the option. The options expire on 2/1/09. It is assumed that the options were for services performed equally in 2007 and 2008. The Black-Scholes option pricing model determines total compensation expense to be $1,300,000.
c) At 2/1/09, four executives exercised their options. The fifth executive chose not to exercise his options, which therefore were forfeited.
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The solution is in a word document that shows Journal Entries using the Fair Value Method.
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1. 1/1/07 No entry necessary.
2. 2/1/07 No entry necessary.
12/31/07
Compensation ...
Education
- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
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