Problem 31-1(IFRS)

Irish Company granted 10,000 share options to each of five directors on January
1,2020. The options vest on January 1,2024. The fair value of each option on January
1,2020 is P50 and it is anticipated that all of the share options will vest on January
1,2024.
What amount should be reported as compensation expense for 2020?
a. 750,000
b. 500,000
c. 625,000
d. 125,000

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Answer: C.

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10,000 * ₱50 * 5 directors / 4 years

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Problem 31-2 (AICPA Adapted)
In connection with a share option plan for the benefit of key employees, Ward Company
intends to distribute equity shares when the options are exercised. The par value per
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share is P30. On January 1, 2020, the entity granted share options of 100,000 shares at
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an option price of P38 per share as additional compensation for services to be rendered
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over the next three years The options are exercisable beginning January 1, 2023, by
grantee still employed by the entity. Market price share was P47 at the grant date. The
fair value of the share option is P12 on the grant date. All share options were exercised
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during 2023.
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What amount should be reported as compensation expense for 2020?

a. 600,000
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b. 400,000
c. 300,000
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d. 450,000
Answer: B.
100,000 * ₱12 = 1,200,000 / 3 = ₱400,000

Problem 31-3 (AICPA Adapted)

On January 1,2020, Oak Company granted share options tocertain key employees as
additional compensation. The options were for 100,000 ordinary shares of P10 par

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 value at an option price of P15 per share. Market price of this share on January 1,2020
was P20.The fair value of each share option on January 1,2020 is P8. The options were
exercisable immediately beginning January 1,2020 and expire on December 31,2021.
On December 31, 2020, all share options were exercised.
What amount of compensation expense should be reported in 2020?
a. 800,000
b. 500,000
c. 200,000
d. 125,000
Answer: A.
100,000 * ₱8

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Problem 31-4 (IAA)

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On June 30,2020, Newman Company granted compensatory share options for 30,000
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P20 par value ordinary shares to certain key employees. The market price of the share
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on that date was P36 and the option price was P30. An option pricing model measured
the total compensation expense to be P5,400,000. The options are exercisable
beginning January 1,2023, provided the key employees are still in entity's employ at the
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time the options are exercised. The options expire on June 30,2024. On January 15,
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2023, when the market price of the share was P42 all 30,000 options were exercised.
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What amount should be reported as compensation expense for 2020?

a. 2,160,000
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b. 1,080,000
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c. 5,400,000
d. 2,700,000
Answer: D.
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₱5,400,000 / 2 (2023 – 2024)

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Problem 31-5 (AICPA Adapted)

On January 1,2020, Morey Company granted Dean, the president, 20,000 share
appreciation rights for past services. These rights are exercisable immediately and
expire on January 1,2022. On exercise, Dean is entitled to receive cash for the excess
of the share market price on the exercise date over the market price on the grant date.
Dean did not exercise any of the rights during 2020.The market price of Morey\'s share
was P30 on January 1,2020 and P45 on December 31,2020.

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 As a result of the share appreciation rights, what amount should be recognized as
compensation expense for 2020?
a. 0
b. 100,000
c. 300,000
d. 600,000
Answer: C.
₱45 - ₱30 = 15 * 20,000 = 300,000

Problem 31-6(AICPA Adapted)

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Wolf Company granted 30,000 share appreciation rights which entitled key employees

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to receive cash equal to the difference between P20 and the market price of the share

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on the date each right is exercised. The service period is 2020 through 2022, and the
rights are. exercisable in 2023.The market price of the share was P25 and P28 on

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December 31,2020 and 2021, respectively.
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1.What amount should be reported as compensation expense for 2020?
a. 25,000
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b. 40,000
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c. 50,000
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d. 30,000
Answer: C.
₱25 - ₱20 = 5 * 30,000 * 1/3
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2.What amount should be reported as compensation expense for 2021?

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a. 120,000
b. 150,000
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c. 110,000
d. 160,000
Answer: D.
₱28 - ₱20 = 8 * 30,000 * 2/3

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