a. Prepare the entry to record the issuance of the bonds and warrants.

b. Assume the same facts as part E16.10a., except that the warrants had an estimated fair value of
€20. Prepare the entry to record the issuance of the bonds and warrants.
E16.11 (LO3) (Issuance and Exercise of Share Options) On November 1, 2018, Olympic plc adopted
a share-option plan that granted options to key executives to purchase 40,000 shares of the
company's £10 par value ordinary shares. The options were granted on January 2, 2019, and were
vested 2 years after the date of grant if the grantee was still an employee of the company. The
options expired 6 years from date of grant. The option price was set at £40, and the fair value option-
pricing model determines the total compensation expense to be £600,000.
All of the options were exercised during the year 2021: 30,000 on January 3 when the market price was
£67, and 10,000 on May 1 when the market price was £77 a share.
Instructions

Prepare journal entries relating to the share-option plan for the years 2019, 2020, and 2021. Assume
that the employees perform services equally in 2019 and 2020.
E16.12 (LO3) (Issuance, Exercise, and Forfeiture of Share Options) On January 1, 2019, Magilla
SA granted share options to officers and key employees for the purchase of 20,000 of the company's
€10 par ordinary shares at €25 per share. The options were exercisable within a 5-year period
beginning January 1, 2021, by grantees still in the employ of the company, and expiring December
31, 2025. The service period for this award is 2 years. Assume that the fair value option-pricing
model determines total compensation expense to be €400,000.
On April 1, 2020, 3,000 options were forfeited when the employees resigned from the company. The
market price of the ordinary shares was €35 per share on this date.
On March 31, 2021, 12,000 options were exercised when the market price of the ordinary shares was
€40 per share.
Instructions

Prepare journal entries to record issuance of the share options, forfeiture of the share options, exercise
of the share options, and charges to compensation expense, for the years ended December 31, 2019,
2020, and 2021.
E16.13 (LO3) (Issuance, Exercise, and Expiration of Share Options) On January 1, 2018, Tsang
Ltd. granted 10,000 options to key executives. Each option allows the executive to purchase one
share of Tsang's HK$5 par value ordinary shares at a price of HK$20 per share. The options were
exercisable within a 2-year period beginning January 1, 2020, if the grantee is still employed by the
company at the time of the exercise. On the grant date, Tsang's shares were trading at HK$25 per
share, and a fair value option-pricing model determines total compensation to be HK$450,000.
On May 1, 2020, 9,000 options were exercised when the market price of Tsang's shares were HK$30
per share. The remaining options lapsed in 2022 because executives decided not to exercise their
options.
Instructions

Prepare the necessary journal entries related to the share-option plan for the years 2018 through 2022.
E16.14 (LO3) (Accounting for Restricted Shares) Derrick plc issues 4,000 restricted shares to its
CFO, Dane Yaping, on January 1, 2019. The shares have a fair value of £120,000 on this date. The
service period related to these restricted shares is 4 years. Vesting occurs if Yaping stays with the
company for 4 years. The par value of the shares is £5. At December 31, 2020, the fair value of the
shares is £145,000.
Instructions

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