Parkerparker sells homemade knit scarves for $ 14$14 each at local craft shows.

16 more scarves

Explanation:

Giving the following information:

Parker sells homemade knit scarves for $14 each at local craft shows. Her contribution margin ratio is 62.5%.

Contribution margin ratio= (Selling price - unitary variable costs)/ selling price

0.625= (14 - CVu)/14

5.25=CVu

To calculate the extra scarves we need to use the following formula:

break-even point (in units)= fixed costs/contribution margin

break-even point (in units)= (700*0.20)/(14-5.25)= 16 more scarves

Answer and Explanation:

1. The measurement date should always be  the date of grant i.e. January 1, 2018

2. For computing the compensation expense first we have to find out the fair value of award which is shown below:

= estimated fair value per option  × number of options granted

= $6 ×  29 million    

= $174 million    

So, The total compensation is to be allocated is

= $174 million ÷ 3 years

= $58 million per year

3. The journal entries are shown below:

                                                  ($ in millions)

On 2019

Compensation expense ([$174 × 90% × 2 ÷ 3] – $58)        $46.4

   Paid-in capital - stock options         $46.4

(Being the compensation expense is recorded)

On 2020

Compensation expense ([$174 × 90% × 3 ÷3] – $58 – $46.4)      $52.2

       To Paid-in capital–stock options              $52.2

(Being the compensation expense is recorded)

On 2022

Cash ($20 × 90% = $18 exercise price × 26.1 million shares)            $469.8

Paid-in capital - stock options ($20 × 90% = $18 exercise price × $6 per option)       $156.6

         To   Common stock   (26.1 million shares × $1)         $26.1

         To  Paid-in capital – excess of par (balancing figure)                     $600.3

The market price at exercise is not relevant. Hence, ignored it

The 26.1 million is come from

= 29 million options - 2.9 million options

= 26.1 million options