Reference no: EM132752256

Problem - On December 31, 2018, Santiago Inc.'s ordinary shares were selling for P55 per share. On this date, the company creates a compensatory share option plan for its 70 employees. The plan document states the each employee may purchase 500 shares of its P20 par ordinary shares at P35 per share after one year if revenues reach P15M, after 2 years if revenues reaches P18M, or after three years if revenues reach P20M. On this date, based on a reliable option pricing model, Santiago Inc. estimates that each option which can be exercised up to 2023 under condition that the employee is still within the employ of the company, has a fair value of P18.

The company has experience a stable 25% increase in revenues for the past 5 years and reasonably expects the same trend for the upcoming years.

The following are available from the company's records:

Year	Actual Revenues Earned	Remaining employees at year end	Expected additional employee Resignation
2019	P14.5M	68	8
2020	P17.5M	65	5
2021	P20.5M	63

Forty-five employees exercised their vested options on June 15, 2022 while three employees resigned on the same year without exercising their options, thus were fortified.

Required -

1. What is the compensation expense related to the share option plan to be recognized in the 2019 financial statement?

a. 315,000

b. 270,000

c. 207,000

d. 90,000

2. What is the compensation expense related to the share option plan to be recognized in the 2020 financial statements?

a. 315,000

b. 270,000

c. 207,000

d. 90,000

3. What is the balance of the additional paid-in capital account related to the share options as of December 31, 2021?

a. 207,000

b. 540,000

c. 567,000

d. 630,000

4. What is the balance of the ordinary share option outstanding account as of December 31, 2022?

a. 135,000

b. 162,000

c. 270,000

d. 405,000

5. What is the resulting share premium from the issuance of shares from the exercise of the employee options?

a. 405,000

b. 432,000

c. 742,500

d. 877,500