XYZ Ltd. granted 2,000 options on 1st April, 2015 at ₹50 (nominal value ₹10 each) when the market price was ₹170. The vesting period was two-and-a-half (2½) years. The maximum exercise period was one year. On 1st May, 20

Journal Entries in the Books of XYZ Ltd. Date Particulars L.F. Debit (₹) Credit (₹) 1-4-15 Deferred Employee Compensation Expenses A/c [Note 1] Dr. 240000 To Employee Stock Options outstanding A/c 240000 (Being Grant of 2000 options at a discount of ₹120 each) 31-3-16 Employee Compensation Expenses [Note 2] A/c Dr. 96000 To Deferred employee Compensation Expenses A/c 96000 (Being Amortization of Deferred Compensation over two and a half year on straight line) 31-3-17 Employee Compensation Expenses A/c [Note 2] Dr. 96000 To Deferred Employee Compensation Expenses A/c 96000 (Being Amortization of Deferred Compensation) 1-5-17 Employee Stock Options outstanding A/c [Note 3] Dr. 60000 To Deferred Employee Compensation Expenses A/c [Note 4] 12000 To Employee Compensation Expenses A/c [Note 5] 48000 (Being Reversal of compensation expense not amortized and amortized portion) 30-9-17 Employee Compensation Expenses A/c [Note 7] Dr. 36000 To Deferred Employee Compensation Expenses A/c 36000 (Being Amortization of Deferred Compensation) 30-6-18 Bank A/c Dr. 60000 Employee Stock Options outstanding A/c Dr. 144000 To Equity Share Capital A/c 12000 To Securities Premium A/c [Note 6] 192000 (Being exercise of the options at a exercise price of ₹50 each) 1-10-18 Employee Stock Options outstanding A/c Dr. 36000 To Employee Compensation Expenses A/c [Note 8] 36000 (Being reversal of compensation accounting on lapse of 300 vested options at the end of exercise period) Working Note Accounting value of options = 2000 * (₹170 - ₹50) = ₹240000 Amortization: I year (240000/2.5) = ₹96000 II year (240000/2.5) = ₹96000 III year (240000 * 0.5/2.5) = ₹48000 (Total value of Compensation / Total No. of options) * No of options not exercised (240000 / 2000) * 500 = ₹60000 (Not yet Amortised value of Compensation / Total number of options) * No. of options not exercised (240000-96000-96000) / 2000 * 500 = 12000 (Amortised value of compensation / Total No. of options) * No. of options not exercised (96000+96000) / 2000 * 500 = ₹48000 Securities Premium = No of options exercised (Market value - Face value) = 1200 * (₹170 - ₹10) = ₹192000 ₹240000 - ₹96000 - ₹96000 - ₹12000 = ₹36000 Employee Compensation Expense on 01.10.2018 = No. of vested options lapsed * (Market value - Exercise value) = 300 * (170-50) = ₹36000