Assume that a total of 12,000,000 options were granted at the beginning of fisca
ID: 2420190 • Letter: A
Question
Assume that a total of 12,000,000 options were granted at the beginning of fiscal year 2009. Each option granted employees the right to purchase one share of common stock at a price of $14 per share. The options have a 4-year service period. The FV of the options were determined to be $36M. Assume all options exercised during fiscal-year 2013 related to these options, and that they were exercised at year-end, 2013. Prepare the journal entries related to the stock options from 2009 to 2013. 6,151,766 options were exercised in 2013.
Explanation / Answer
Answer: Journal entry:
2009 No entry on the date of grant
2009 Compensation expense A/C Dr. $9,000,000
To Paid in capital-Stock options A/C $9,000,000
($36 million/4)
2010 Compensation expense A/C Dr. $9,000,000
To Paid in capital-Stock options A/C $9,000,000
($36 million/4)
2011 Compensation expense A/C Dr. $9,000,000
To Paid in capital-Stock options A/C $9,000,000
($36 million/4)
2012 Compensation expense A/C Dr. $9,000,000
To Paid in capital-Stock options A/C $9,000,000
($36 million/4)
2013 Cash A/C Dr. $86124724 (6151766*14)
Paid in capital-stock options A/C Dr. $18455298 (36000000*6151766/12000000)
To Common capital A/C $61517660 (6151766*10)
To paid in capital in excess of par A/C $43062362
Paid in capital stock options A/C DR. $17544702
To Paid in capital-expired options A/C $17544702