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Q 1a: On October 1, 2018, XYZ Corp hires another new executive. This executive is granted...

Q 1a: On October 1, 2018, XYZ Corp hires another new executive. This executive is granted 20,000 shares of restricted stock when its common stock ($1 par value) is trading at $12/share. The vesting period is also 2 years. Show the journal entry on October 1.

Q 1b: How much is the change in total stockholders' equity at this October 1 grant date?

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Answer #2

Total value of stock options granted

Stock value will be calculated by using fair market value.

Fair market value on date of grant = $12

Stock granted =20,000

Value of stock options = $240,000 (20,000*$12)

Total value of stock option expensed every year will be divided by vesting period.

Vesting period = 2 years.

Stock option expensed every year = $120,000 ($240,000/2)

There is no need of journal entry on grant date.

Expenses has be recorded over the period when employess worked till he excercise.

Annual compensation expense has be recorded at the end of the year.

Debit to compensation expense or Stock option or Stock compenstation A/C

Debit Compenstation expense $80,000

Credit Paid Iin Capital - Option $80,000

b) Stock holders equity will not be changed on grant date.

At the end of the year on foot note no of shares garnted and fair market value of shares has to be disclosed.

answered by: anonymous
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