SHARE BASED COMPENSATION-QUIZ With Answer [PDF]

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INTACC 2 QUIZ 1. On January 1, 2019, Camil Company granted an employee an option to purchase 10,000 ordinary shares with P5 par value at P20 per share. The option became exercisable on December 31, 2020, after the employee completed two years of service. The fair value of the share option is P15. The option was exercised on January 10, 2021. The share prices are P30 on January 1, 2019, P50 on December 31, 2019, and P60 on January 10, 2021. Required: a. What is the compensation expense for 2019? (10,000 x P15 = P 150,000) x ½ = P 75,000 b. Entry to record accrual of compensation expense at December 31, 2019 and December 31, 2020 December 31, 2019 Salaries-Share option 75,000 Share option outstanding 75,000 December 31, 2020 Salaries-Share option Share option outstanding

75,000 75,000

c. Entry to record exercise of share option on January 10, 2021. Cash (10,000 x P20) 200,000 Share option outstanding 150,000 Ordinary share capital (10,000 x P5) Share premium

50,000 300,000

2. On January 1, 2017, Mari Company granted share options to certain key employees as additional compensation. The options were for 50,000 ordinary shares of P10 par value at an option price of P15 per share. Market price of this share on January 1, 2017 was P20. The fair value of each share options on January 1, 2017 is P8. The options were exercisable beginning January 1, 2017 and expire on December 31, 2019. On December 31, 2017, when the share was trading at P21, all share points were exercised. Required: a. What amount of compensation expense should be reported in 2017 in connection with the share options? 50,000 x P 8 =P400,000 b. Entry to record accrual of compensation expense. Salaries-share options Share option outstanding

400,000

c. Entry to record exercised of share options on December 31, 2017. Cash (50,000 x P15) 750,000 Share option outstanding 400,000 Ordinary share capital (50,000 x P10) Share premium

400,000

500,000 650,000

3. On January 1, 2017, Pau Company granted 60,000 shares options to employees. The share options will vest at the end of 3 years provided the employees remain in service until then. The option price is P60 and the par value per share is P50. At the date of grant, the entity concluded that the fair value of the share options cannot be measured reliably. The share options have a life of 4 years which means that the share options can be exercised within one year after vesting. The share prices are P62 on December 31, 2017; P66 on December 31, 2018; P75 on December 31, 2019 and P85 n December 31, 2020. All share options were exercised on December 31, 2020. a. What is the compensation for 2019? FMV – Dec 31, 2019 Option price

P

Multiply by Share options Total Compensation Expense 2019 Less : Accrual 2017 & 2018 [{60,000 x (P66-60) x 2/3= P240,000)

---------------660,000 =========

Accrual 2019 b. What is the compensation expense for 2020? FMV-Dec 31, 2020 P FMV-Dec 31, 2019

75 60 --------------15 60,000 ---------------900,000 240,000

85

Multiply by Share option Increase in Share option Outstanding

75 ---------------10 60,000 ---------------600,000 =========

c. Entry to record compensation expense for 2019. Salaries-Share option 660,000 Share option outstanding d. Entry to record compensation expense , if any for 2020. Salaries-share option 600,000 Share option outstanding

660,000 600,000

e. What is the share premium upon exercises of the share options on December 31, 2020? Option Price (60,000 x P60) P 3,600,000 Par value of ordinary shares (60,000 x P50) 3,000,000 ------------------------Share premium 600,000 Add: Share option outstanding 1,500,000 -------------------------Total Share Premium P 2,100,000 ================ f. Entry to record exercises of share options on December 31, 2020. Cash 3,600,000 Share option outstanding 1,500,000 Ordinary share capital 3,000,000 Share premium 2,100,000