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 75,000
Share option outstanding 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) 50,000
Share premium 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 400,000
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) 500,000
Share premium 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 P 75
Option price 60
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15
Multiply by Share options 60,000
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Total Compensation Expense 2019 900,000
Less : Accrual 2017 & 2018 240,000
[{60,000 x (P66-60) x 2/3= P240,000)
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Accrual 2019 660,000
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b. What is the compensation expense for 2020?
FMV-Dec 31, 2020 P 85
FMV-Dec 31, 2019 75
----------------
10
Multiply by Share option 60,000
----------------
Increase in Share option Outstanding 600,000
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c. Entry to record compensation expense for 2019.
Salaries-Share option 660,000
Share option outstanding 660,000
d. Entry to record compensation expense , if any for 2020.
Salaries-share option 600,000
Share option outstanding 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
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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
