Problem 25 – 7

Requirements:

1. Compensation expense using intrinsic value

2017

Market value – Dec. 31, 2017 63

Less: Option price 60

Intrinsic value of each option 3

Multiply by share options 30000

Total Compensation 90000

Compensation expense for 2017 45000 (90000/2)

2018

Market value – Dec. 31, 2018 66

Less: Option price 60

Intrinsic value 6

Share options 30000

Total Compensation 180000

Recognized in 2017 45000

Compensation expense for 2018 135000

2019

Market value – Dec. 31, 2019 75

Less: Option price 60

Intrinsic value 15

Share options 30000

Total Compensation 450000

Recognized in 2018 135000

Compensation expense for 2019 315000

2020

Market value – Dec. 31, 2020 88

Market value – Dec. 31, 2019 75

Increase in intrinsic value 13

Share options exercised 10000

Additional Compensation (2020) 130000

2021

Market value – Dec. 31, 2021 100

Market value – Dec. 31, 2020 88

Increase in intrinsic value 12

Share options exercised 15000

Additional Compensation (2021) 180000

2022

Market value – Dec. 31, 2022 90

Market value – Dec. 31, 2021 100

Increase in intrinsic value (10)

Share options exercised 5000

Reduced in Compensation (2022) (50000)