On January 1, 2016, Manders Inc. granted 250,000 qualified stock options to acquire 250,000 shares of Manders $4 par value common stock at $38 per…

  • On January 1, 2016, Manders Inc. granted 250,000 qualified stock options to acquire 250,000 shares of Manders $4 par value common stock at $38 per share.
  • The options vest on December 31, 2018, and expire on December 31, 2022.
  • Using the Black Scholes option pricing model, the estimated value of a single option on the grant date was $1.80.
  • In early 2017, employees who were granted 60,000 options left Manders to work for Kruz Inc.
  • During 2020, employees exercised 140,000 options when the market price of Manders common stock was $43 per share.
  • At December 31, 2022, the remaining options expired because they were underwater.

1) Which of the following statements is correct?

A) On the grant date, no journal entry is made for the stock options because neither the employees nor Manders executed the contract.

B) On the grant date, Manders total compensation expense is estimated to be $450,000.

C) A and B.

D) Neither A nor B.

2) Which of the following statements is correct?

A) In the adjusting journal entry made on December 31, 2016, “paid in capital-stock options” should be credited for $150,000.

B) In the entry to record the forfeiture of the stock options in 2017, “paid in capital-expired stock options” should be debited for $36,000.

C) A and B.

D) Neither A nor B.

3) For the year ended December 31, 2017, the net compensation expense related to Manders stock options was

A) $78,000.

B) $114,000.

C) $150,000.

D) $87,000.

4) Which of the following statements is correct?

A) Compensation expense for 2018 is $114,000.

B) At December 31, 2018, the balance in the account “paid in capital-stock options’ is $342,000.

C) A and B.

D) Neither A nor B.

5) As a result of the exercise of the 140,000 options in 2020,

A) Paid in capital-stock options should be debited for $290,000.

B) Paid in capital—excess over par should be credited for $5,012,000.

C) A and B.

D) Neither A nor B.

6) As a result of the expiration of the remaining stock options in 2022,

A) Paid in capital-stock options should be debited for $90,000.

B) Compensation expense should be credited for $72,000.

C) Paid in capital-expired stock options should be credited for $18,000.

D) A, B, and C.

  • Klinton Inc. issued $1,500,000 of bonds with detachable warrants for $1,520,000 on March 31, 2016.
  • On the day of issuance, the market value of the bonds without the warrants was $1,386,000, and the market value of one warrant was $12.
  • Each $1,000 bond contained 3 detachable warrants that expire on March 31, 2020.
  • Each warrant can be used to acquire one share of Klinton’s $2 par value common stock at $64 per share.
  • 1.) How much should Klinton record for “paid in capital-detachable warrants” as a result of the issuance of bonds and detachable warrants?
  • A) $54,000.
  • B) $134,000.
  • C) $57,000.
  • D) $37,000.
  • 2) Assume 1,350 warrants are exercised in 2020. What is the increase in Klinton’s stockholders’ equity as a result of the exercise of the warrants?
  • A) $94,500.
  • B) $77,400.
  • C) $103,500.
  • D) $86,400.
  • 3.) Using the information provided in the previous question, which of the following statements is correct about the journal entry to record the exercise of the warrants?
  • A)Paid in capital-detachable warrants should be charged for $17,100.
  • B)Paid in capital-excess over par should be credited for $83,700.
  • C)A and B.
  • D) Neither A nor B.
  • 4) Assume Klinton did not know the market value of the warrants on March 31, 2016. In the journal entry to record the issuance of the debt with detachable warrants, discount on bonds would be recorded at
  • A) $37,000.
  • B) $114,000.
  • C) $134,000.
  • D)$57,000.

SHOW WORK PLEASE