PROBLEM 24-1

Fair value of options (40,000 x 30) 1,200,000

Annual compensation (1,200,000/ 2) 600,000

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 (35,000 shares x 125) 4,375,000
Share options outstanding (35,000 x 30) 1,050,000
Ordinary share capital (35,000 x 100) 3,500,000
Share premium 1,925,000

DEC 31 Share options outstanding (5,000 x 30) 150,000

Share premium - unexercised stock options 150,000

PROBLEM 24-2

2020 Salaries share options (450,000/2) 225,000

Share options outstanding 225,000

2021 Salarics-share options (600,000-225,000) 375,000

Share options outstanding 375,000

2022 Salaries share options (30,000 x 5) 150,000

Share options outstanding 150,000

Cash (30,000 x 30) 900,000

Share options outstanding 750,000
Ordinary share capital (30,000 x 10) 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 3,000

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 30

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 sharc options 48,000
Multiply by fair value cach option 50
Total fair value of share options 2,400,000

Cumulative ecompensation-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 (8%+ 10%/2) 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 (8% + 10% +8% /3) 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 24-7

2020 Salaries (90,000/3 years) 30,000

Share options outstanding 30,000

Share options 30,000

Multiply by intrinsic value (63-60) 3
Total intrinsic value 90,000

2021 Salaries 90,000

Share options outstanding 90,000

Share options 30,000

Multiply by intrinsic value (66-60) 6
Total intrinsic value 180,000

Cumulative compensation- 12/31/2021 (180,000/3 x2 years) 120,000

Compensation recognized in 2020 30,000
 Compensation expense for 2021 90,000

2022 Salaries 330,000

Share options outstanding 330,000

Share options 30,000

Multiply by intrinsie value (75-60) 15
Cumulative compensation 12/31/2022 450,000
Cumulative compensation 12/31/2021 120,000
Compensation expense for 2022 330,000

2023 Salaries 390,000

Share options outstanding 390,000

Share options 30,000

Multiply by increase in intrinsic valuce (88-75) 13
Additional compensation 190,000

Cash (10.000 x 60) 600,000

Share options outstanding (10,000 x 28) 280,000
Share capital (10,000 x 50) 500,000
Share premium 380,000

Intrinsic value per option (88-60) 28

2024 Salaries 240,000

Share options outstanding 240,000

Share options (30,000-I0,000) 20,000

Multiply by increase in intrinsic value (100-88) 12
Additional compensation 240,000

Cash (15,000 x 60) 900,000

Share options outstanding (15,000x 40) 600,000
Share capital (15,000 x 50) 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

Share options (20,00015,000) 5,000

Multiply by decrease in intrinsic value (100-90) 10
Decrease in intrinsic value 50,000
 Cash (5,000x 60) 300,000
Share options outstanding (5,000 x 30) 150,000
Share capital (5,000 x S0) 250,000
Share premium 200,000

Intrinsic value per option (90-60) 30

PROBLEM 24-8

REQUIREMENT 1

2020 Salaries 300,000

Share options outstanding 300,000

Salaries 400,000
Share options outstanding 400,000

Salaries (1,500,000-700,000) 800,000

Share options outstanding 800,000

Cash (20,000 x 110) 2,200,000

Share options outstanding 1,500,000
Share capital (20,000 x 100) 2,000,000
Share premium 1,700,000

REQUIREMENT 2

2022
DEC 31 Share options outstanding 700,000
Salaries 600,000
Cash 1,300,000

PROBLEM 24-10

2020 Number of employees 2,000

Employces 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 20,000

 Employees who left in 2020 (80)
Employees who left in 2021 (90)
Employees expected to leave (60)
Employces 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 employces 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

2020 Salaries expense 712,000

Share options outstandingg 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

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

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

PROBLEM 24-12 ANSWER D

Total compensation (40,000 x 20) 800,000
Compensation for 2020 (800,000/2) 400,000

PROBLEM 24-13 ANSWER C

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

Problem 24-14 Answer C

Compensation expense for 2020 (80,000 x 10x 96%/2) 384,000

Problem 24-15 Answer C

(1,000x 50) 50,000

Problem 24-16 Answer A

Fair value of share options (100,000 x 8) 800,000

Problem 24-17 Answer C

(8,000,000-2,000,000-2, 100,000) 1,900,000

Problem 24-18 Answer B

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

Cumulative compensation 2019 and 2020 (15,000 x 40x 95%/3 x 2) 380,000

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

Problem 24-20 Answer C

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

To record the compensation for 2020:

 Salaries (10,000 x 30) 300,000
Share options outstanding 300,000

To record the exerecise of the options on December 31, 2020:

Cash (10,000 x 20) 200,000

Share options outstanding 300,000
Ordinary share capital (10,000 x 10) 100,000
Share premium 400,000

Problem 24-22

Question 1 Answer A (5,000 x 60) 300,000

Question 2 Answer A

Cash received (5,000 x 120) 600,000

Problem 24-23 Answer C

(350,000 x 2) 700,000

Problem 24-24 Answer B 500,000

Problem 24-25 Answer A

Problem 24-26 Answer B

Compensation expense for 2020 (240,000/2 years service period) 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)

2020 Fair value of share options (500 x 100 x 30) 1,500,000

Compensation expense for 2020 (1.500,000 /3) 500,000

2021 Number of employees

Employees who left in 2021
Employees expected to leave
Employees entitled to share options

Fair value of share options (440 x 100 x 30)

 Cumulative compensation on 12/31/2021 (1,320,000/3x2)
Compensation expense recognized in 2020
Compensation expense in 2021

2022 Number of employees

Employees who left in 2021
Employees who left in 2022
Employees entitled to share options

Fair value of share options 12/31/2022 (450 x 100 x 30)

Cumulative compensation 12/31/2021
Compensation expense in 2022

Exercise price (45,000 shares x 120)

Fair value of options - 12/31/2022
Total consideration
Par value (45,000 x 100))
Share premium from exercise

Problem 24-28

Question 1 Answer C
Question 2 Answer C
Question 3 Answer C
Question 4 Answer A

Problem 24-29

Question 1 Answer D
Question 2 Answer A

Problem 24-30

Question 1 Answer D
Question 2 Answer B
Question 3 Answer A

Problem 24-31

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

Problem 24-32

1C
2D
3B
4D
5C

Problem 24-32

1B
2A
3C
4C
5B