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Question 1

Baltac Corp. (BC) has been a publicly accountable enterprise for the past five years. On December 16, 2016, for the first time, BC adopted a stock option plan for its three top executives. The company agreed to make 45,000 shares available under this plan and agreed on a strike price of $21 per share. On December 16, 2016, the company’s share price on the TSE closed at $21.

On January 3, 2017, the following options were granted to each of executives Smith, Jones and Chen, and the options granted at this time were estimated to have a total fair value of $405,000:

• – For services to be provided in 2017: 4,000 options each
• – For services to be provided in 2018: 5,000 options each
• – For services to be provided in 2019: 6,000 options each

15,000 options each

The options are exercisable during the two-year period from January 1, 2020 to December 31, 2021, after which they will expire. The market prices of the BC shares were as follows:

January 3, 2017 $20.50

December 31, 2017 $23.00

December 31, 2018 $28.10

December 31, 2019 $30.00

December 31, 2020 $31.50

December 31, 2021 $28.00

The three executives exercised their options as follows: 50% of the options on December 31, 2020 and the other 50% on December 31, 2021.

Required:

• a)Determine the compensation expense recognized by BC in each year from 2016 to 2021.
• b)Identify the accounts and amounts that will be reported on BC’s statement of financial position for each year ending December 31 from 2016 to 2021. Also identify the balance sheet classification of these balance sheet account(s).