Required: d. At the end of 2023, Purple managers reach their goal of revenue increase. Write the journal entry required for 12/31/2023. e. Separate from the options above. Purple previously had granted and recognized stock options with a value of $200,000 that were exercised in 2023. The 40,000 stock options had a strike price of $20 and the market price of the common stock on the day of exercise was $28 per share. Record the journal entry to show the exercise of the options.
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- On Jan. 1, 2020, Hufflepuff Industries, Inc. issues stock options for 100,000 shares to a regional manager. The options have an estimated fair value of $6 each. The provide additional incentive for the manager's achievement, the options are not exercisable unless the region revenue increase by 8% in three years. Hufflepuff initially estimates that it is probable that the goal will be achieved. How much compensation will be recorded in 2020, 2021, and 2022, the vesting period?On October 1, 2024, Halsey Company issued stock options for 300,000 shares to a division manager. The options have an estimated fair value of $3 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 6% in three years. Halsey initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in each of the next three years? A.$0 B.$100,000 C.$300,000 D.$900,000On January 1, 2024, Blue Incorporated issued stock options for 340,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 4% in three years. Blue initially estimates that it is not probable the goal will be achieved, but in 2025, after one year, Blue estimates that it is probable that divisional revenue will increase by 4% by the end of 2026. Ignoring taxes, what is the decrease in earnings in 2025? Multiple Choice $340,000 $680,000 $1,020,000 $1,360,000
- On January 1, 2021, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in 2021, 2022, 2023?On January 1, 2018, Black Inc. issued stock options for 200,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 6% in three years. Black initially estimates that it is probable the goal will be achieved. In 2019, after one year, Black estimates that it is not probable that divisional revenue will increase by 6% in three years. Ignoring taxes, what is the effect on earnings in 2019? $200,000 decrease $200,000 increase O $400,000 increase O No effectOn January 1, 2024, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Suppose that after one year, Farmer estimates that it is not probable that divisional revenue will increase by 5% in three years. Required: What is the revised estimate of the total compensation? What action will be taken to account for the options in 2025? What journal entry will be needed to account for the options in 2025?
- On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. Theoptions have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, theoptions are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimatesthat it is probable the goal will be achieved. How much compensation will be recorded in each of the next threeyears?LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2018. Theoptions entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement ofspecific financial goals over the next four years. Attainment of these goals is considered probable initially andthroughout the service period. The options have a current fair value of $12 per option.Required:1. Prepare the appropriate entry when the options are awarded on January 1, 2018.2. Prepare the appropriate entries on December 31 of each year 2018–2021.3. Suppose at the beginning of 2020, LCI decided it is not probable that the performance objectives will be met.Prepare the appropriate entries on December 31 of 2020 and 2021.Big-Funds Ltd. granted stock options to executives in early 2022. The stock options vest over four years and expire after six years. In total, the options allow the purchase of 40,000 shares at $10 per share. Option pricing models indicate that the options have a total fair value of $600,000. Estimates of retention are 80% at the end of 2022 and 75% at the end of 2023. Required: a) Provide the journal entries to be recorded with respect to the options at the end of 2022 and 2023. b) What would the balance be in the equity account for stock options at the end of the forth year if retention remained at 70%? c) Assume that actual retention was 70%, and the options were exercised at the end of the fourth year when the market price of common shares is $25. Provide the entry for exercise. d) Assume that retention was 70% but the options were allowed to lapse after six years when the price of common shares is $4. Provide the entry for the lapse.
- On October 1, 2016, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in each of the next three years?On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. Theoptions have an estimated fair value of $6 each. To provide additional incentive for managerial achievement,the options are not exercisable unless Farmer Fabrication’s stock price increases by 5% in three years. Farmerinitially estimates that it is not probable the goal will be achieved. How much compensation will be recorded ineach of the next three years?Grant options, that vest in 36 months, to officers to buy 50,000 common shares for $18 each (current MV $18) over an 8-year exercise period, valued at $450,000 using the Black-Scholes pricing model. The average 2022 CS MV is $20. What would the journal entry look like for year 2022.