On January 1, 2019, Rhine Company adopts a performance-based share option plan for its 80 key executives. Each executive
Posted: Sat Feb 19, 2022 2:34 pm
On January 1, 2019, Rhine Company adopts a performance-based
share option plan for its 80 key executives. Each executive is
granted a maximum of 70 share options, but the number of options
that vest depends on the percentage increase in Rhine’s sales over
a 3-year service period. If by December 31, 2021, sales have
increased by at least 10%, 50 options will vest for each executive;
if sales have increased by at least 15%, all 70 options will vest.
On the grant date, Rhine estimates that its sales will increase by
12% over the service period, and that its employee turnover rate
over the 3-year service period will be 6%. It also determines that
the fair value of an option expected to vest is $13.40. At the end
of 2021, actual sales had increased by 16% for the service period,
and the actual turnover was 6 key executives for the service
period.
Required:
share option plan for its 80 key executives. Each executive is
granted a maximum of 70 share options, but the number of options
that vest depends on the percentage increase in Rhine’s sales over
a 3-year service period. If by December 31, 2021, sales have
increased by at least 10%, 50 options will vest for each executive;
if sales have increased by at least 15%, all 70 options will vest.
On the grant date, Rhine estimates that its sales will increase by
12% over the service period, and that its employee turnover rate
over the 3-year service period will be 6%. It also determines that
the fair value of an option expected to vest is $13.40. At the end
of 2021, actual sales had increased by 16% for the service period,
and the actual turnover was 6 key executives for the service
period.
Required: