Question

AC313

Zygo Corp. granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $35 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $7.50 per option. If the options have a vesting period of five years, what would be the balance in "Paid-in Capital-Stock Options" three years after the grant date? Multiple Choice O A debit of $12.5 million 0 A credit of $12.5 million 0 A credit of $4.5 million 0 Adebit of $4.5 milion 0

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

2 3 Answer Part 1) The correct answer is A credit of $ 4.5 million 5 Calculation 6 The fair value of the total options are $ 7.5 million ($7.5* 1 million) with is to be expensed in 5 Years vesting period 7 So per year compensation expense = 7.5 million/5 8 = $ 1.5 million 11 10 The balance in Paid in capital stcok options afetr 3 years = per year expense 3 =$ 1.5 million * 3 12 = $ 4.5 million credit balance 13 Thus the correct answer is A credit of $ 4.5 million 14 15 Part 2) 16 The correct answer is $ 10146 17 Calculation 18 Firstly we have to calculate the value of asset as on Beginning of 2022 19 = Cost - ((cost-salvage Value)*((5+4)/(5+4+3+2+1))) 20 = 80100 - ((80100-4005)*(9/15)) 21 = $ 80100-45657 22 =$34443 23 24 Now we can calculate the depreciation for 2022 under straight Line Method 25 =(Bokk value at beginning of 2022-salvage value)/remaining life 26 =(34443-4005)/(5-2) 27 = $ 10146 29 Thus the correct answer is $ 10146