Answer:
1.$12,000,000
2.31-Dec-2021
Dr Compensation expense $6,000,000
Cr Paid-in-capital-stock options $6,000,000
31-Dec-2022
Dr Compensation expense $6,000,000
Cr Paid-in-capital-stock options $6,000,000
Explanation:
1.)
Total compensation cost of stock options = Estimated fair market value of the option x Number of options granted
=$3 x 4,000,000 shares
=$12,000,000
Therefore total compensation cost of stock options is $12,000,000
2. to 4.) Journal Entries
31-Dec-2021
Dr Compensation expense $6,000,000
Cr Paid-in-capital-stock options $6,000,000
31-Dec-2022
Dr Compensation expense $6,000,000
Cr Paid-in-capital-stock options $6,000,000
Compensation expense
= Total compensation cost of stock options/Vesting period
=$12,000,000/2 years
=$6,000,000
