Reference no: EM132723509

Questions -

Q1. On January 1, 2017, Solov Company granted to a senior officer 10,000 share options conditional upon the executive remaining in the entity's employ until December 31, 2019. However, the share options cannot be exercised unless the share price has increased from $50 on January 1, 2017 to above $65 on December 31, 2019. If the share price is above $65 on December 31, 2019, the share options can be exercised at any time during the next 5 years. The entity applied a binomial option pricing model and estimated that the fair value of the share option with this market condition on the grant date is $24. What is the compensation expense for 2017?

Q2. Otter Corporation was organized on January 3, 2016, with an authorized capital of 100,000 shares of $10 par ordinary shares. During 2016, Otter had the following transactions affecting shareholders' equity:

January 7--Issued 40,000 shares at $12 per share

December 2--Purchased 6,000 shares of treasury shares at $13 per share.

The cost method was used to record the treasury shares transaction. Otter's net income for 2016 is $300,000.

What is the amount of shareholders' equity on December 31, 2016?

Q3. The Megae Corporation was incorporated on January 1, 2016, with the following authorized capitalization: 40,000 ordinary shares, no par value, stated value $40 per share 10,000 shares of 5 percent cumulative preference shares, par value $10 per share. During 2016, Amelia issued 24,000 ordinary shares for a total of $1,200,000 and 6,000 shares of preference shares at $16 per share. In addition, on December 20, 2016, subscriptions for 2,000 shares of preference shares were taken at a purchase price of $17. These subscribed shares were paid for on January 2, 2017. What should Megae report as total contributed capital on its December 31, 2016, balance sheet?