Reference no: EM132708017
Question - On January 1, 2020, Tunis Inc. granted stock options for 50,000 of its no par value common shares to key employees, at an option price of $ 27. On that date, the market price of the common shares was $ 23. The Black-Scholes option pricing model determined total compensation expense to be $ 360,000. The options are exercisable beginning January 1, 2022, provided the key employees are still employed by Tunis at the time the options are exercised. The options expire on January 1, 2023. On January 2, 2021, when the market price of the shares was $ 29 per share, 75% of the 50,000 options were exercised, with the reminder expired on January 1, 2023.
Required -
1. Determine the intrinsic value and the time value of the stock options granted.
2. Determine the total compensation expense of the stock options.
3. Prepare journal entry, if necessary, to record the granting of the stock options on January 1, 2020.
4. Prepare journal entry, if necessary, to record the stock options on December 31, 2020.
5. Prepare journal entry, if necessary, to record the exercise of the 75% of the stock options on January 1, 2022.
6. Prepare journal entry, if necessary, to record the expiration of the 25% of the stock options on January 1, 2023.
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