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What the journal entry to recognize the compensation

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Reference no: EM132626351

On January 1, 2014, an entity granted 50,000 share options to the employees. The option price is P60 and the par value of each share is P50. The vesting period is 4 years. The fair value of the share options or total compensation expense to the vesting date on December 31, 2017 has been calculated at P4, 000,000. The entity has decided to settle the award early on December 31, 2016.

The compensation expense charged in the income statement since the date of grant on January 1, 2014 is as follows:

2014           1,000,000

2015           1,050,000

If the share options are canceled or settled during the vesting period, it is as if the vesting date had been brought forward and the balance of the fair value not yet expensed is recognized immediately.

In other words, the entity shall recognize immediately in 2016 the compensation expense that otherwise would have been recognized for service over the remainder of the vesting period.

Total compensation expense 4,000,000

Cumulative compensation recognized in 2014 and 2015

(1,000,000 + 1,050,000) (2, 050,000)

Compensation expense in 2016 1,950,000

Problem 1: The journal entry to recognize the compensation for 2016 is:

Reference no: EM132626351

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