Ensor materials corporation approved a stock option plan

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1.On October 15, 2012, the board of directors of Ensor Materials Corporation approved a stock option plan for key executives. On January 1, 2013, 20 million stock options were granted, exercisable for 20 million shares of Ensor's $1 par common stock. The options are exercisable between January 1, 2016, and December 31, 2018, at 80% of the quoted market price on January 1, 2013, which was $15. The fair value of the 20 million options, estimated by an appropriate option pricing model, is $6 per option.
Two million options were forfeited when an executive resigned in 2014. All other options were exercised on July 12, 2017, when the stock's price jumped unexpectedly to $19 per share.

Required:
1. When is Ensor's stock option measurement date?
2. Determine the compensation expense for the stock option plan in 2013. (Ignore taxes.)
3. What is the effect of forfeiture of the stock options on Ensor's financial statements for 2014 and 2015?
4. Is this effect consistent with the general approach for accounting for changes in estimates? Explain.
5. How should Ensor account for the exercise of the options in 2017?

Reference no: EM13879826

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