60.1K

Verified Solution

Link Copied!

On January 1, 2021, Farmer Fabrication issued stock options for 420,000 shares to a division manager. The options have an estimated fair value of $10 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 2% in three years. Suppose that Farmer initially estimates that it is not probable the goal will be achieved, but then after one year, Farmer estimates that it is probable that divisional revenue will increase by 2% by the end of 2023. Required: 1. What is the revised estimate of the total compensation? 2. What action will be taken to account for the options in 2022? 3. Prepare the journal entries to record compensation expense in 2022 and 2023. Complete this question by entering your answers in the tabs below. Reg and 2 Reg 3 What is the revised estimate of the total compensation and what action will be taken to account for the options in 2022? 1. Estimate total compensation 2. What action will be taken to account for the options in 2022? (Req Farmer will reflect the cumulative effect on compensation in 2022 earnings. Farmer will reverse the 2021 recorded compensation. 1. What is the revised estimate of the total compensation? 2. What action will be taken to account for the options in 20222 3. Prepare the journal entries to record compensation expense in 2022 and 2023. Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Prepare the journal entries to record compensation expense in 2022 and 2023. (If no entry is requir journal entry required" in the first account field. Do not round intermediate calculations. Round your dollar.) View transaction list Journal entry worksheet 1 2 Record compensation expense. Note: Enter debits before credits. General Journal Debit Credit Date 2022

Answer & Explanation Solved by verified expert

See Answer