How much compensation cost should prime recognize

Assignment Help Accounting Basics

Reference no: EM131983482

Problem

Stock Compensation: Prime went public in 2005 and experienced a continued increase in stock prices through 2007. With the sustained growth of the business and rising stock price, Prime developed a practice of granting annual stock option awards to its executives at the beginning of each year.

On January 1, 2008, Prime granted 1,000 employee share options that vest after a four-year service period, with an exercise price of $30 per share. Using the Black-Scholes pricing model, it was determined that the grant-date-fair-value-based measure of each option was $15. On the grant date, Prime's stock was trading at $30 per share.

On January 1, 2010, Prime decided to change the terms of the incentives for the third and fourth years of service of the 2008 annual grant by modifying the exercise price to $20 per share. Using the Black-Scholes pricing model, management determined that the fair-value-based measure of the awards as of January 1, 2010 was $9 before the terms of the award were modified and $12 immediately after modification. The modification did not affect any of the other terms or conditions of the awards. (No forfeitures are assumed.)

(1) How much compensation cost should Prime recognize in each year of the award's service period?

(2) How would the accounting for the awards change if the modification to the terms of the award was made on January 1, 2014, after the awards have become fully vested?

Reference no: EM131983482

Questions Cloud

Networks and workplace relationships : Consider the questions that follow below and develop a cohesive reflection addressing all points.

Social media is positive influence on business communication : BCOM101 - Business Communication - Write a persuasive academic essay on social Media is a Positive influence on internal and external business communication

What is appropriate journal entry to record a stock dividend : What is the appropriate journal entry to record a 35% stock dividend if the market price of the common stock is $45 per share when the dividend is declared?

Confidence of colleagues and external contacts : How can you best gain and maintain the trust and confidence of colleagues and external contacts through professional conduct?

How much compensation cost should prime recognize : How much compensation cost should Prime recognize in each year of the award's service period?

How is each shareholders personal income tax return affected : What is ChadCo's E&P‘? How is each shareholder's personal income tax return affected for the current year by the tax items of ChadCo?

Prepare the december selected journal entries : Prepare the December 30, 2014 selected journal entries for the company on the answer sheet (if no entry required, state "no entry").

Research two articles on the topic of emerging enterprise : Write a brief synthesis and summary of the two articles. How are the topics of the two articles related? What information was relevant and why?

What you need to do to provide support for project team : SIT60316 - Advanced Diploma of Hospitality Management - Develop a detailed operational plan that ensures the objectives and strategies outlined are met by work

User Account

All Pages