Reference no: EM131561191
Problem -
On December 21, Year 5, the board of directors of Oak Corporation approved a plan to award 200,000 stock options to 20 key employees as additional compensation. Effective January 1, Year 6, each employee was granted the option to purchase 10,000 shares of the company's $10 par value stock at an exercise price equal to the January 1, Year 6, market price of $30 per share. All share options vest at December 31, Year 8, the end of the 3-year requisite service period. They expire on December 31, Year 15. Based on an appropriate option-pricing formula, the fair value of the options was estimated at $8 per option.
1. What entry, if any, should be recorded upon the grant of the options On January 1, Year 6?
2. Assume on June1, Year 9, 50,000 share options are exercised. What entry will Oak Corporation make assuming the stock's market price is $50 per share at that time?
3. Assume the remaining 15 0,000 options expire unexercised on January 1, Year 16, what entry will be made?
4. What entry, if any, should be made on December 31 of Year 6?
5. If 20% of the employees receiving grants resign on January 1, Year 8, what entry, if any, is required on that date?
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