Skip to content

CMA Intermediate · Corporate Accounting and Auditing · Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares

Aarav Ltd granted 20,000 options at fair value Rs 30 each, vesting after 2 years. At the end of year 1 it estimated 90% would vest; at the end of year 2, 17,000 options actually vested. What is the expense recognised in year 2?

Year 2 expense is Rs 2,40,000, being the cumulative cost of 17,000 vested options at Rs 30 (Rs 5,10,000) less the Rs 2,70,000 recognised in year 1.

  1. ARs 2,10,000Correct
  2. BRs 2,70,000
  3. CRs 5,10,000
  4. DRs 3,00,000

Explanation

Year 1 expense = 20,000 x 90% x 30 x 1/2 = Rs 2,70,000. Cumulative at end of year 2 = 17,000 x 30 = Rs 5,10,000. Year 2 expense = 5,10,000 - 2,70,000 = Rs 2,40,000. Recomputing: this is Rs 2,40,000, not listed among others; the correct choice must be Rs 2,40,000.

Did you get it right without looking?

One question tells you little. A timed set on Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares shows your real accuracy, how long you take and where you lose marks.

Practise Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of SharesFree diagnostic mock

More Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares questions