question archive On January 1, 2016, Howard, Inc
On January 1, 2016, Howard, Inc
Subject:AccountingPrice:3.87 Bought7
On January 1, 2016, Howard, Inc. granted to a key executive a fixed compensatory share option plan for 1,000 shares of $4 par common stock for $30 a share. The fair value per option on that date was $14. The service period extended through December 31, 2017.
Refer to Exhibit 15-3. What entry, if any, was required on December 31, 2016?
a. no entry was necessary
b. Compensation Expense 7,000
Paid-in Capital Share Options 7,000
c. Compensation Expense 6,000
Paid-in Capital Share Options 6,000
d.Compensation Expense 9,000
Deferred Compensation 9,000
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ANSWER:
| Total Fair value of options = 1000*14 = 14000 |
| The Compensation Expense is to be recognized equally over 2016 and 2017 |
| The Compensation Expense for 2016 = 14000/2 = $7000 |
| The entry required on December 31, 2016 is: |
| Compensation Expense 7,000 |
| Paid-in Capital Share Options 7,000 |
| Option B is correct |
