AMIS_522_Quiz_5[1]

AMIS_522_Quiz_5[1] - Circle your answer. +4 for either 10...

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AMIS 522 – Quiz 5 Name________________________________________________ Use the following information to answer questions 1 through 3. Vacaro Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, Vacaro granted incentive stock options on January 1, 2011, that permit executives to acquire 10 million of the company’s $1 par common shares within the next 8 years, but not before December 31, 2014 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18.50 per share. The fair value of the 10 million options, estimated by an appropriate option pricing model, is $5 per option. Two million options were forfeited when an executive resigned in 2012. All other options were exercised on January 15, 2015, when the stock’s price unexpectedly jumped to $25 per share. Ignore taxes. 1. Determine the total compensation cost the company will record over the service (or vesting) period.
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Unformatted text preview: Circle your answer. +4 for either 10 million total options: $50 million total OR $40 million after forfeiture 2. Prepare the appropriate journal entry (if any) to record Vacaros compensation expense on December 31, 2012 . +1 Compensation Expense 7.5M +1 PIC-stock options 7.5M credit if accounts are correct (but amounts are incorrect. . 12.5M each year based on initial estimate; 10M each year after consideration of forfeiture. Based on forfeiture, cumulative exp recorded through the end of year 2 = 20M; 12.5M was recorded in prior year, so amount needed for 2012 is 7.5M. 3. Prepare the appropriate journal entry to record the exercise of the options on January 15, 2015. +1 PIC-stock options 40M +1 Cash 148M +1 Common stock 8M +1 PIC-excess of par (or APIC) 180M credit if accounts are correct (but amount are incorrect)....
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This note was uploaded on 10/10/2011 for the course BUSINESS 522 taught by Professor Paul during the Spring '11 term at Ohio State.

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