Answer:
Explanation:
1) Determine the total compensation cost pertaining to the options on January 1, 2021
Total Compensation cost on January 1, 2021 = Number. of Stock options × Fair Value of Option
Given that :
Adams-Meneke Corporation granted 60 million incentive stock options to division managers
and there is a $5 per option estimated pricing model
Then:
Total Compensation cost on January 1, 2021 = 60,000,000 × 5
= 300,000,000
= 300 million vested over three years.
2) Prepare the appropriate journal entry to record compensation expense on December 31, 2021.
Compensation expense for 2021 = 300 million/ 3 years = $100 million
The Journal entry amount in dollars is as follows:
Date Account Titles and Explanations Debit Credit
Dec 31st, 2021 Compensation Expense 100
Paid in Capital-Restricted Stock 100
(To record compensation expense
for 2021)