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Homework answers / question archive / On January 1, 2020, the shareholders of Chargers Inc

On January 1, 2020, the shareholders of Chargers Inc

Accounting

On January 1, 2020, the shareholders of Chargers Inc. adopted a stock option plan for its top executives, where each could

receive rights to purchase up to 3,000 common shares at $ 40 per share. At this date, the shares were trading for $ 32 per

share.

 

On February 1, 2020, options were granted to five executives to purchase 3,000 shares each. The options were non

transferable and the executive had to remain an employee of the company to exercise the option. The options expire on

February 1, 2022. It is assumed that the options were for services performed equally in 2020 and 2021. The Black-Scholes

option pricing model determined total compensation expense to be $ 390,000.

 

On February 1, 2022, four executives exercised their options. The fifth executive chose not to exercise her options, which

therefore were forfeited.

 

Instructions

Prepare the necessary entries for the above events, on:

a.January 1, 2020; (1 mark)

b.February 1, 2020; (1 mark)

c.December 31, 2020; (2 mark)

d.December 31, 2021; (2 marks)

e.February 1, 2022. (5 marks)

If no entry is needed, write "No entry necessary."

Option 1

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