Prepare the necessary journal entries at the vesting date

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Question - On 1 January 2018, Entity A offered twenty directors an option scheme conditional on a three-year period of service.

The number of options granted to each director at the inception of the scheme was 2,000,000. The options are required to exercise at the end of the third year. Otherwise, they will be expired.

Upon exercise of the share options, those directors eligible would be required to pay $2.50 for each share.

The fair value of the options and the estimates of the number of options expected to vest at various points in time were as follows:

Year

Option Rights Expected to Vest

Fair Value of the Option

1 January 2018

16,000,000

$0.60

31 December 2018

14,000,000

$0.65

31 December 2019

18,000,000

$0.75

At the end of 2020, 20,000,000 option rights are actually vested and they are exercisable.

Required - Prepare the necessary journal entries at the vesting date for exercising the options when the fair value of a share was $4.00 and the fair value of a share was $2.00 respectively.

Reference no: EM133110247

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