CHAPTER 24

Problem 24-1
2020
Dec. 31 Salaries-share options 600,000
Share options outstanding 600,000

2021
Dec. 31 Salaries - share options 600,000
Share options outstanding 600,000

2022
Jan. 15 Cash 4,375,000
Share options outstanding 1,050,000
Ordinary share capital 3,500,000
Share premium 1,925,000

Dec. 31 Share options outstanding 150,000

Share premium - unexercised stock options 150,000

Problem 24-2
2020
Salaries share options 225,000
Share options outstanding 225,000

2021 375,000
Salaries - share options 375,000
Share options outstanding

2022
Salaries share options 150,000
Share options outstanding 150,000

Cash 900,000
Share options outstanding 750,000
Ordinary share capital 300,000
Share premium 1,350,000
Problem 24-3
Compensation expense for 2020 (6,000,00 x 95%/3) 1,900,000

Cumulative compensation - 12/31/2021 (6,000,000 x 94%/3 x 2) 3,760,000

Less: Compensation recognized for 2020 1,900,000
Compensation expense for 2021 1,860,000

Cumulative compensation- 12/31/2022 (6,000 x 95%) 5,700,000

Less: Cumulative compensation 12/31/2021 3,760,000
Compensation expense for 2022 1,940,000

Problem 24-4
2020
Number of employees 300
Employees who Ieft (20)
Employees expected to leave (10)
Employees entitled 270
Multiply by share options 200
Total share options 54,000
Multiply by fair value each option 50
Total fair value of share options 2,700,000

Compensation expense for 2020 (2,700,000/3) 900,000

2021
Number of employees 300
Employees who left in 2020 (20)
Employees who left in 2021 ( 8)
Employees expected to leave (32)
Employees entitled 240
Multiply by share options 200
Total share options 48,000
Multiply by fair value each option 50
Total fair value of share options 2,400,000

Cumulative compensation -December 31, 2021 (2,400,000/3 x 2) 1,600,000

Less: Compensation recognized for 2020 900,000
Compensation expense for 2021 700,000

2022
Number of employees 300
Employees who left in 2020 (20)
Employees who left in 2021 ( 8)
Employees who left in 2022 (25)
Employees entitled 247
Multiply by share options 200
Total share options 49,400

Cumulative compensation- 12/31/2022 (49,400 x 50) 2,470,000

Less: Cumulative compensation 12/31/2021 1,600,000
Compensation expense for 2022 870,000

Problem 24-5
2020
Number of employees 100
Multiply by share options 100
Total share options 10,000
Multiply by fair value each option 30
Total fair value of share options 300,000

Compensation expense for 2020 (300,000/3) 100,000

2021
Average increase 9%

Number of employees 100

Multiply by share options 100
Total share options 10,000
Multiply by fair value each option 30
Total fair value of share options 300,000

Cumulative compensation-12/31/2021 (300,000/3 x 2) 200,000

Less: Cumulative compensation 12/31/2020 100,000
Compensation expense for 2021 100,000

2022
Average increase 12%

Number of employees 100

Multiply by share options 200
Total share options 20,000
Multiply by fair value each option 30
Total fair value of share options 600,000
Less: Cumulative compensation 12/31/2021 200,000
Compensation expense for 2022 400,000
Problem 24-6
1. 2020
Share options 10,000
Multiply by fair value each option 45
Total fair value of share options 450,000

Compensation expense for 2020 (450,000/3) 150,000

2021
Compensation expense for 2021 150,000

2022
Share options 10,000
Multiply by fair value each option 40
Cumulative compensation 12/31/2022 400,000
Less: Cumulative compensation -12/31/2021 300,000
Compensation expense for 2022 100,000

1. 2020
Salaries - share options 150,000
Share options outstanding 150,000

2021
Salaries share options 150,000
Share options outstanding 150,000

2022
Salaries- share options 100,000
Share options outstanding 100,000

Cash 1,200,000
Share options outstanding 400,000
Share capital 500,000
Share premium 1,100,000

Problem 24-7
2020
Salaries 30,000
Share options outstanding 30,000

2021
Salaries 90,000
 Share options outstanding 90,000

2022
Salaries 330,000
Share options outstanding 330,000

2023
Salaries 390,000
Share options outstanding 390,000

Cash 600,000
Share options outstanding 280,000
Share capital 500,000
Share premium 380,000

Intrinsic value per option (88-60) 28

2024
Salaries 240,000
Share options outstanding 240,000

Cash 900,000
Share options outstanding 600,000
Share capital 750,000
Share premium 750,000

Intrinsic value per option (100-60) 40

2025
Share options outstanding 50,000
Gain on reversal of share options 50,000

Cash 300,000
Share options outstanding 150,000
Share capital 250,000
Share premium 200,000

Intrinsic value per option (90-60) 30

Problem 24-8
1. 2020
Salaries 300,000
Share options outstanding 300,000

2021
Salaries 400,000
Share options outstanding 400,000

2022
Salaries 800,000
Share options outstanding 800,000

Cash 2,200,000
Share options outstanding 1,500,000
Share capital 2,000,000
Share premium 1,700,000

2. 2022
Dec. 31 Share options outstanding 700,000
Salaries 600,000
Cash 1,300,000

Problem 24-9
1. 2020
Salaries 240,000
Equity contribution from parent 240,000

2021
Salaries 246,000
Equity contribution from parent 246,000

2022
Cash 972,000
Share capital 810,000
Share premium 162,000
Problem 24-10
1. 2020
Number of employees 2,000
Employees who left in 2020 (80)
Employees expected to leave (140)
Employees entitled to share options 1,780
Multiply by number of share options 20
Total share options 35,600
Multiply by fair value of share option 60
Total compensation 2,136,000

Compensation for 2020 (2,136,000/3) 712,000

2021
Number of employees 2,000
Employees who left in 2020 (80)
Employees who left in 2021 (90)
Employees expected to leave (60)
Employees entitled to share options 1,770
Multiply by number of share options 20
Total share options 35,400
Multiply by fair value of share option 60
Total compensation 2,124,000

Cumulative compensation 12/31/2021 (2,124,000/3 x 2) 1,416,000

Compensation based on modification (35,400 x 20/2 years) 354,000
Total 1,770,000
Compensation expense for 2020 (712, 000)
Compensation expense for 2021 1,058,000

2022
Number of employees 2,000
Employees who left in 2020 (80)
Employees who left in 2021 (90)
Employees who left in 2022 (50)
Employees entitled to share options 1,780
Multiply by number of share options 20
Total share options 35,600
Multiply by fair value of share option 60
Cumulative compensation- 12/31/2022 2,136,000
Compensation based on modification (35,600 x 20) 712,000
Total compensation 2,848,000
Compensation expense for 2020 (712,000)
Compensation expense for 2021 (1,058,000)
Compensation expense for 2022 1,078,000

2. 2020
Salaries expense 712,000
Share options outstanding 712,000

2021
Salaries expense 1,058,000
Share options outstanding 1,058,000

2022
Salaries expense 1,078,000
Share options outstanding 1,078,000

Problem 24-11 Answer A. 150,000

Total compensation (20,000 x 15) 300,000

Compensation for 2020 (300,000/2) 150,000

Problem 24-12 Answer D. 400,000

Total compensation (40,000 x 20) 800,000

Compensation for 2020 (800,000/2) 400,000

Problem 24-13 Answer C. 400,000

Compensation expense for 2020 (200,000 x 6/3) 400,000

Problem 24-14 Answer C. 384, 000

Problem 24-15 Answer C. 100, 000

Problem 24-16 Answer A. 800,000

Problem 24-17 Answer C. 3,900,000

Problem 24-18 Answer B. 2,200,000

Cash payment 5,000,000
Share options outstanding (1,500,000+ 1,300,000) (2,800,000)
Compensation expense for 2020 2,200,000

Problem 24-19 Answer C. 180,000

Cumulative compensation 2019 and 2020 380,000
Compensation for 2019(15,000 x 40/3) 200,000
Compensation expense for 2020 180,000

Problem 24-20 Answer C. 220,000

2020 (20% x 40,000 x 10) 80,000
2021 (30% x 40,000 x 15) 180,000
2022 (50% x 40,000 x 20) 400,000
Total compensation 660,000

Straight line (660,000/3) 220,000

Problem 24-21 Answer A. 200,000

Problem 24-22
Question 1 Answer A. 300,000
Question 2 Answer A. 600,000

Problem 24-23 Answer C. 700,000

Problem 24-24 Answer B. 500,000

Problem 24-25 Answer A. 2,160,000

Problem 24-26 Answer B. 120,000

Problem 24-27
Question 1 Answer C. 500,000
Question 2 Answer C. 380,000
Question 3 Answer D. 470,000
Question 4 Answer A. 2,250,000

Problem 24-28
Question 1 Answer C. 300,000
Question 2 Answer C. 300,000
Question 3 Answer C. 150,000
Question 4 Answer A. 2,250,000
Problem 24-29
Question 1 Answer D. 1,200,000
Question 2 Answer A. 4,500,000

Problem 24-30
Question 1 Answer D. 660,000
Question 2 Answer B. 600,000
Question 3 Answer A. 2,100,000

Problem 24-31 Problem 24-32 Problem 24-33

1. A 1. C 1. B
2. A 2. D 2. A
3. B 3. B 3. B
4. A 4. D 4. D
5. D 5. C 5. B
6. B
7. A
8. C
9. C
10. D