MENU
On 1 January 20X4 EF grants each of its 125 employees500 share options on the condition that they remain in employment for 3 years. During the year to 31 December 20X4 10 employees left and It is expected that a further 25 will leave before the end of the vesting period.
The fair value of each shareoption is $30 on 1 January 20X4 and $45 on 31 December 20X4.
What is the journal entry in respect of these share options in EF's financial statements for the year ended 31 December 20X4?
Suggested Answer: A, B, C, D
Get Premium CIMAPRA19-F02-1 Questions
as Interactive Web-Based Practice Test or PDF
Real Exam Format
Detailed Explanations
Instant Access
Get Your Practice Test
36 comments · newest first
ST
Stefany
11 months ago
So, what's the journal entry for this? Anyone know?
HO
Howard
11 months ago
Totally agree, the fair value increase is significant!
KE
Kerry
11 months ago
Wait, how can they estimate 25 more will leave? Sounds off.
MI
Mignon
12 months ago
Fair value jumped from $30 to $45, wow!
AL
Alaine
12 months ago
Each employee gets 500 options, that's 62,500 total!
WI
Wilford
1 year ago
I think we should recognize the expense over the vesting period, but I’m not clear on how to factor in the employees who left. It feels tricky!
GE
Genevive
1 year ago
I’m a bit confused about the fair value changes. Do we use the initial fair value for the journal entry, or the one at the end of the year?
BR
Brandon
1 year ago
This question seems similar to one we practiced about vesting periods. I think we need to calculate the expense based on the expected number of employees remaining.
NI
Nikita
1 year ago
I remember we discussed share options in class, but I'm not sure how to account for the employees who left. Do we adjust the total options?
AM
Amira
1 year ago
I'm not entirely sure how to handle the fair value changes. Do I need to account for that in the expense calculation, or is it just the grant date fair value that matters?
LE
Lenna
1 year ago
This is straightforward enough. I just need to determine the total expense, split it evenly over the 3 years, and record the appropriate amount in the financial statements for this year.
MU
Murray
1 year ago
Hmm, I'm a bit confused about how to account for the employees who left during the year. Do I need to adjust the expense for them, or just focus on the remaining employees?
GE
German
1 year ago
This looks like a tricky share-based payment question. I'll need to carefully calculate the total expense to be recognized in the financial statements based on the vesting conditions and fair value changes.
WH
Whitley
1 year ago
Okay, I think I've got this. I'll need to calculate the total fair value of the options on the grant date, then adjust that for the expected forfeitures. Then I'll recognize the expense over the 3-year vesting period.
RU
Rueben
1 year ago
Hmm, this looks like a tricky one. I'll need to think through the details carefully to make sure I get the right answer.
RO
Rosio
1 year ago
No problem, I've got this. I'll just plug the numbers into the formula and solve for the material mix variance. Should be straightforward.
CH
Chaya
1 year ago
Okay, let's see. The key here is understanding how the dynamic nature of a cloud environment affects the organization's risk management. I think option B, risk appetite, is the best choice since the rapid changes would likely require the organization to adjust their willingness to take on risk.
CO
Coral
1 year ago
I think rolling out the product on a preliminary basis can help identify risks, but it seems risky to me… like an experiment!
MI
Mila
2 years ago
So, we should debit the share option expense for the employees who left and credit the share option reserve.
LA
Lawanda
2 years ago
Yes, the journal entry should reflect the decrease in the number of employees eligible for the share options.
SA
Sanda
2 years ago
Ooh, I bet this is one of those 'calculate the expense' type questions. Time to pull out my accounting cheat sheet!
MI
Mignon
1 year ago
B) Debit share option expense $6,250, Credit share option reserve $6,250
SH
Shaniqua
1 year ago
A) Debit share option expense $3,750, Credit share option reserve $3,750
NG
Ngoc
1 year ago
B) Option
LO
Loise
1 year ago
A) Option
FA
Fannie
2 years ago
Haha, 'fair value' of share options? I guess they're trying to make us work for that one!
MI
Mila
2 years ago
I think we need to consider the impact of employees leaving on the share options.
NO
Norah
2 years ago
Wait, did they say 'vesting period'? I better make sure I understand how that affects the accounting treatment.
FE
Fernanda
1 year ago
It's important to understand the impact of employees leaving before the end of the vesting period.
VI
Viola
1 year ago
The fair value of the options will impact the accounting treatment.
LO
Louis
1 year ago
The vesting period is the time an employee must work for the company before they can exercise their options.
KA
Katie
1 year ago
Employee stock options are a form of compensation.
SH
Shanda
2 years ago
I agree. And we need to account for the change in fair value of the share options as well.
KA
Katheryn
2 years ago
Hmm, this question seems tricky. I'll need to carefully consider the details about the share options and the expected employee turnover.
LA
Lavina
2 years ago
Yes, we should also consider the number of employees who left and are expected to leave before the end of the vesting period.
SH
Shanda
2 years ago
I think we need to calculate the total number of share options granted first.