Fall 2010 Class 4

1 2005 chen corp grants five executives jan options

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Allocating Compensation Expense Allocating Compensation Expense Compensation Expense iis determined at the s measurement date using option pricing model using and is allocated over the service period the service • The service period is the period benefited by employee’s service employee’s • It is usually the period between the grant date and the vesting date and Accounting for CSOP­Example Accounting for CSOP­Example • Jan., 1, 2005. Chen Corp. grants five executives Jan., options to purchase 10,000 shares, options • Vesting/service period=2 yrs. • The options will expire in 10 years • Exercise price=$60 per share • The current market price for the share is $70 per The share. share. • Assume the total fair value of the option is $220,000 Assume at the grant date, Accounting for CSOP­Example Accounting for CSOP­Example At grant date, Jan. 1. , 2005 : no entry required. On Dec. 31, 2005 & Dec 31, 2006: Compensation Expense 110,000*** Compensation Contributed Surplus—Stock Options 110,000 *** 110,000=220,000/2 If 2,000 options (20% ) were exercised on June 1, 2008. Cash 120,000* Cash Contributed Surplus—Stock Options 44,000** Common Shares 164,000 * 120,000=2,000* $60 $60 ** 44,000= 20% *220,000 20% *220,000 Accounting for CSOP­Example Accounting for CSOP­Example Assume the remaining opt...
View Full Document

This note was uploaded on 03/15/2012 for the course BUS 303 taught by Professor Brown during the Spring '11 term at Simon Fraser.

Ask a homework question - tutors are online