Answer:
1. The Ensor's stock measurement date is January 01, 2021
2. Compensation expense for the stock option is $50 million
3. Please see journal entry in the explanation below.
Explanation:
1. It was clearly indicated in the question that on January 1, 2021 , 32 million stock options were granted hence measurement date is ; 1st of January, 2021
2. The fair value per stock option is $6
Therefore, total compensation expenses = $6 × 25 million
= $150 million
Since the options are exerciseable between 01/01/2024 and 01/01/2026
The period for vesting will be 3 years from 01/01/2021 - 31/12/2023
Therefore, the compensation expense for the stock option in year 2021 = Total compensation expense/ Vesting period
= $150 million /3
= $50 million
3. Since 2.6 million(10%) were forfeited, 90% represent the remaining unforfeited. I. e (100%-10%)=90%
In 2022, which is the second year of the vesting period, compensation expense would be;
Compensation expense of 2022 = (Total compensation expense * 90% * the order of the period / Number of period - Compensation expense of
2021
= $150 million *90% *2/3 - $50 million
=$40 million.
In 2023,
Dr Cr
Compensation expense. $40 million
Paid in capital stock options. $40 million
