Reference no: EM132644430
Question -
a. On 1/1/2020, the stockholders of the firm ABC approve a plan that grants the company's CEO options to purchase 5,000 shares each of the company's zero par value common stock.
b. The company grants the options on January, 1, 2020. the executives may exercise the options after 1/1/2022. The exercise price per share is $10, and the market price of the stock at the date of grant is $10 per share.
c. The company computes total compensation expense by applying an acceptable fair value option-pricing model (such as black-scholes option pricing model). to keep this illustration simple , we assume that the fair value option pricing model determines the executive's total compensation expense to be $10,000.
d. Corporate tax rate is 20%. Income tax expense for 2020 and 2021 is $50,000 and income taxes payable for 2020 and 2021 is $51,000 prepare journal entries on 31/12/2020 and 31/12/2021.
Suppose that the CEO exercise options on 1/1/2022 to purchase 5,000 shares and the market price of the stock is $20 per share. Prepare journal entries.
What is the realized value loss to the current shareholders?
Prepare the journal entries related to tax return?
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