Lock Company purchased $100,000, 10%, 5-year bonds on January 1, 20x1, with interest payable on July 1 and January 1. The effect
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Answer:
$300,000
Explanation:
Option expenses to be recognized in the first year ,
= × period elapsed - Expenses already recognized
wherein N = No of options expected to be vested
FV = Fair value on the grant date
Vesting period = The time period after which the options can be exercised
Thus, after the first year, employee compensation expenses to be recognized
= × 1 year = $300,000 - 0 = $300,000
Similarly, for the second year, option expenses to be recognized would be,
= × 2 years - $300,000 = $300,000
Similarly for the third year
= × 3 years - ($300,000+ 300,000) = $300,000
The journal entry to be passed each year would be
Stock Option Compensation Expense A/C Dr. $300,000
To Stock Options A/C $300000
(Being stock option expenses for the year recognized)