Nappy Lodge Issued 15,000 At-The-Money Stock Options to Its Management

question 28

Essay

Nappy Lodge issued 15,000 at-the-money stock options to its management on January 1, 2021. These options vest on January 1, 2024. Nappy's share price was $20 on the grant date and $25 on the vesting date. Estimates of the fair value of the options showed that they were worth $3 on the grant date and $11 on the vesting date. On the vesting date, management exercised all 15,000 options. Nappy has a December 31 year-end.
Required:
Record all of the journal entries relating to the stock options.

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Definitions:

Financial Crisis

A situation characterized by a significant decline in the value of financial institutions or assets, leading to a loss of confidence and potentially economic downturns.

Fair Value Accounting

A method of accounting that measures and reports certain assets and liabilities at their estimated market values at the time of the financial statement.

Mark-to-Market

An accounting method that values assets and liabilities based on current market prices.

Real Actions

Legal procedures taken to determine the title to property, as opposed to personal claims against a person.