In 2021, Gregg Industries issues 100,000 option representing $1 par value common stock. The strike price is $25 per option and the market price is $20 per share. Using an option pricing model, the company estimates that the fair value of each option is $8. The options expire in 10 years and the expected service period is 4 years. What is the amount recognized as compensation expense in 2021?
a. No expense is recognized since the market price exceeds the strike price
b. $800,000
c. $200,000
d. $80,000
Hall & Company issues $3,000,000 in 6% bonds with detachable warrants of 10 warrants for each $1,000 bond. The bonds are issued at 102. What is correct in recording the issuance under the following assumption. Assume that the bonds would have sold at 99 without the warrants and the fair value of the warrants is $240,000.
a. Credit bonds payable $2,970,000
b. Debit cash $2,970,000
c. Credit paid in capital warrants - $228,785
d. Debit premium on bonds - $60,000
Hein Inc. has an employee bonus program. The estimate annual bonuses at target performance total $50 million. Hein Inc. follows the calendar year for its fiscal year. At 6/30, the company estimates that it will achieve 110% of its target performance. At the end of March (3/31), the liability for the bonus was $12.5 million. What is correct?
a. The expense for the 2nd quarter would be $12.5 million
b. The liability should total $55 million at the end of the second quarter
c. The expense for the 2nd quarter would be $15 million
d. The liability should total $25 million at the end of the second quarter