Answer:
1.
Total compensation cost pertaining to the options: $90 million
2.
31st Dec 2018
Dr Compensation expenses $ 45,000,000
Cr Paid-in capital - Stock options $45,000,000
(to record compensation expenses allocating to the year 2018)
31st Dec 2019
Dr Compensation expenses $ 45,000,000
Cr Paid-in capital - Stock options $45,000,000
(to record compensation expenses allocating to the year 2019)
Explanation:
1. The compensation cost pertaining to the option equals: Fair value of each option x Number of granted options = $18 x 5,000,000 = $90,000,000.
2. The compensation expenses will be for 02 years (2018 and 2019), thus this expense should be recorded half in the year of 2018 and the other half in the year of 2019, ie $90,000,000/2 = $45,000,000 each year.
