Reference no: EM132948847
On July 1, 2022, Artichoke company granted Red Wine, an employee, an option to buy 600 shares of Artichoke Co. stock for $30 per share, the option is exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $2.700. Wine exercised his option on October 1, 2022 and sold his 600 shares on December 1, 2022.
Quoted market prices of Artichoke Co. stock in 2022 were:
July 1 $30 per share
October 1 $36 per share
December 1 $40 per share
Problem 1: The service period is for three years beginning on January 1, 2022?
Problem 2: As a result of the option granted to Wine, using the fair value method. Artichoke should recognize compensation expense on his books in the amount of what amount?
Problem 3: What amount would Artichoke recognize as compensation expense on the date Red Wine converts the option?
Problem 4: What is the effect of Net Income on Artichoke on the date grant?
Problem 5: What is the effect on Net Income of Artichoke on the date of conversion?
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