Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 15, Problem 6C
1.
To determine
Explain the manner Corporation G would determine the compensation expense for the share option plan in 2019.
2.
To determine
Explain the effect of forfeiture of the share options on Corporation G’s financial statements for 2020.
3.
To determine
Explain the effect of the share option plan on the
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On January 1, 2020 share options were granted to employees where they can
purchase 100,000 ordinary shares of P80 par value at P100 per share. The fair
value of the share options on this date was P40 per share. The officers are entitled
to the share options only after completing two years of service. The options can be
exercised starting January 1, 2022 and shall expire on December 31, 2022. What
amount of compensation expense will be recorded on December 31, 2021?
In order to retain certain key executives, Sheridan Company granted them incentive stock options on December 31, 2020. 144000 options were granted at an option price of $35 per share. Market prices of the stock were as follows:
December 31, 2021$44 per share
December 31, 202249 per share
The options were granted as compensation for executives’ services to be rendered over a two-year period beginning January 1, 2021. The Black-Scholes option pricing model determines total compensation expense to be $1508000. What amount of compensation expense should Sheridan recognize as a result of this plan for the year ended December 31, 2021 under the fair value method?
A. $1508000
B. $2633000
C. $754000
D. $1658000
Subject: accounting
On January 1, 2019, QRS Company granted 80,000 stock options to certain executives. The option vesting period is 4 years ending on December 31, 2022. Each option can be exercised to acquire one share of $1 par common stock for $5. The fair value of each option was estimated to be $3 on the grant date. What amount should QRS recognize as compensation expense for 2020?
Chapter 15 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 15 - Prob. 1GICh. 15 - Prob. 2GICh. 15 - What are the three components and the basic...Ch. 15 - List the various rights of a shareholder. Which do...Ch. 15 - What is the meaning of the following terms: (a)...Ch. 15 - Prob. 6GICh. 15 - Prob. 7GICh. 15 - How does preferred stock differ from common stock?Ch. 15 - What amount of the proceeds from the issuance of...Ch. 15 - Prob. 10GI
Ch. 15 - Prob. 11GICh. 15 - Prob. 12GICh. 15 - Prob. 13GICh. 15 - Prob. 14GICh. 15 - Prob. 15GICh. 15 - Prob. 16GICh. 15 - Prob. 17GICh. 15 - Prob. 18GICh. 15 - Prob. 19GICh. 15 - How is a preferred stock similar to a long-term...Ch. 15 - Prob. 21GICh. 15 - Prob. 22GICh. 15 - Prob. 23GICh. 15 - Prob. 24GICh. 15 - Prob. 25GICh. 15 - What additional disclosures about preferred and...Ch. 15 - Prob. 1MCCh. 15 - Cary Corporation has 50,000 shares of 10 par...Ch. 15 - What is the most likely effect of a stock split on...Ch. 15 - Prob. 4MCCh. 15 - Prob. 5MCCh. 15 - Prob. 6MCCh. 15 - Prob. 7MCCh. 15 - When treasury stock is purchased for cash at more...Ch. 15 - Preferred stock that may be retired by the...Ch. 15 - When treasury stock accounted for by the cost...Ch. 15 - Brown Corporation issues 800 shares of its 5 par...Ch. 15 - Heart Corporation entered into a subscription...Ch. 15 - Blue Corporation issues 200 packages of securities...Ch. 15 - Sun Corporation issues 500 shares of 8 par common...Ch. 15 - Next Level Morgan Corporation issues 500 packages...Ch. 15 - Prob. 6RECh. 15 - On January 1, 2019, Phoenix Corporation adopts a...Ch. 15 - On January 2, 2019, Brust Corporation grants its...Ch. 15 - Prob. 9RECh. 15 - Assume Cole Corporation originally issued 300...Ch. 15 - Violet Corporation issues 1,200 shares of 150 par...Ch. 15 - Assume that Lily Corporation has outstanding 1,500...Ch. 15 - Tulip Corporation uses the cost method to account...Ch. 15 - Par Value and No-Par Stock Issuance Caswell...Ch. 15 - Combined Sale of Stock Maxville Company issues 300...Ch. 15 - Sale of Stock with Bonds Pilsen Company issues 12%...Ch. 15 - Issuance of Stock for Land Putt Company issues 500...Ch. 15 - Prob. 5ECh. 15 - Prob. 6ECh. 15 - Prob. 7ECh. 15 - Prob. 8ECh. 15 - Restricted Share Units On January 2, 2019, Dekker...Ch. 15 - Prob. 10ECh. 15 - Convertible Preferred Stock On January 2, 2019,...Ch. 15 - Prob. 12ECh. 15 - Stock Rights with Preferred Stock Nelson...Ch. 15 - Various Journal Entries Lodi Company is authorized...Ch. 15 - Treasury Stock, Cost Method On January 1, Lorain...Ch. 15 - Contributed Capital Adams Companys records provide...Ch. 15 - Prob. 17ECh. 15 - Treasury Stock, Cost and Par Value Methods On...Ch. 15 - Treasury Stock, No Par Propst-Steele Production...Ch. 15 - Subscriptions On August 3, 2019, the date of...Ch. 15 - Prob. 2PCh. 15 - Prob. 3PCh. 15 - Prob. 4PCh. 15 - Prob. 5PCh. 15 - Prob. 6PCh. 15 - Issuances of Stock Cada Corporation is authorized...Ch. 15 - Issuances of Stock Epple Corporation is authorized...Ch. 15 - Comprehensive Young Corporation has been operating...Ch. 15 - Comprehensive The shareholders equity section of...Ch. 15 - Treasury Stock Analysis Ray Holt Corporation has...Ch. 15 - Comprehensive Byrd Companys Contributed Capital...Ch. 15 - Prob. 13PCh. 15 - Prob. 14PCh. 15 - Reconstruct Journal Entries At the end of its...Ch. 15 - Treasury Stock, Cost Method Bush-Caine Company...Ch. 15 - Prob. 17PCh. 15 - Prob. 1CCh. 15 - Prob. 2CCh. 15 - Prob. 3CCh. 15 - Capital Stock Capital stock is an important area...Ch. 15 - Treasury Stock A corporation sometimes engages in...Ch. 15 - Prob. 6CCh. 15 - Prob. 7CCh. 15 - Compensatory Share Option Plan Tom Twitlet,...Ch. 15 - Prob. 9CCh. 15 - Treasury Stock For numerous reasons, a corporation...Ch. 15 - Prob. 11CCh. 15 - Prob. 12CCh. 15 - Prob. 13CCh. 15 - Prob. 14C
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- On January 1, 2019, Phoenix Corporation adopts a performance-based share option plan for 25 executives, with the number of shares based on the yearly increase in sales. At the end of 2019, based on a 10% increase in sales, it expects that each executive will be granted 150 options and that the fair value of an option expected to vest is 15.75. Phoenix expects a turnover rate of 15% over the 3-year service period. Determine the compensation expense for 2019 for this plan.arrow_forwardOn January 1, 2020 share options were granted to employees where they can purchase 100,000 ordinary shares of P80 par value at P100 per share. The fair value of the share options on this date was P25 per share. The officers are entitled to the share options only after completing two years of service. The options can be exercised starting January 1, 2022 and shall expire on December 31, 2022. The amount of compensation expense to be reported in 2020 is a. P0 b. P1,250,000 c. P2,500,000 d. P8,000,000 Norie Company leased an asset on a finance lease. The present value of the lease payments total P686,000 and the fair value of the asset is P750,000. The asset has a useful life of 5 years and the lease term is 4 years. The bargain purchase option for the asset at the end of its useful life is nominal and is substantially lower than the value of the asset at that date. Depreciation for the asset is computed using straight line method. How much is the annual…arrow_forwardOn November 1, 2019, Sheridan Corp. adopted a stock option plan that granted options to key executives to purchase 42,300 common shares. The options were granted on January 2, 2020, and were exercisable two years after the date of grant if the grantee was still a company employee; the options expire six years from the date of grant. The option price was set at $39, and total compensation expense was estimated to be $541,000. Note that the calculation did not take forfeitures into account. On April 1, 2021, 3,300 options were terminated when some employees resigned from the company. The fair value of the shares at that date was $26. All of the remaining options were exercised during the year 2022: 29,600 on January 3 when the fair value was $49, and 9,400 on May 1 when the fair value was $55 a share. Assume that the entity follows ASPE and has chosen not to reflect forfeitures in its upfront estimate of compensation expense. (a) Prepare journal entries relating to the stock option plan…arrow_forward
- On january 1 2020 share options were granted to employees where they can purchase 100,000 ordinary shares of P80 par value of P100 per share. The fair value od share options on this date was P25 per share. The officers are entitled to the share options only after completing two years of service. The options could be exercise starting january 1,2022 and shall expire on December 31, 2022. The amount of compensation expense to be reported on 2020 is 0 1,250,000 2,500,000 8,000,000arrow_forward1.On January 1, 2019, a company granted 100,000 options to key executives. Each option allows the executive to purchase one share of the company's $14 par value common stock at a price of $44 per share. The options were exercisable within a 2-year period beginning January 1, 2022. On the grant date, a fair value option-pricing model determines total compensation to be $800,000. On January 1, 2022, 1,000 options were exercised. In the journal entry to record the exercise, how much should be recorded for Paid-in Capital in Excess of Par – common stock? 2.A company issued 13,000 shares of $22 par value common stock upon conversion of 24,000 shares of $34 par value preferred stock. The preferred stock was originally issued at $43 per share. The common stock is trading at $22 per share at the time of conversion. In the journal entry to record the conversion of the preferred stock, how much should we record for Paid-in Capital in Excess of Par - common stock?arrow_forwardOn January 1, 2020 share options were granted to employees where they can purchase 100,000 ordinary shares of P80 par value at P100 per share. The fair value of the share options on this date was P25 per share. The officers are entitled to the share options only after completing two years of service. The options can be exercised starting January 1, 2022 and shall expire on December 31, 2022. The amount of compensation expense to be reported in 2020 is P0 P1,250,000 P2,500,000 P8,000,000 A Co entered into an agreement to lease office space on 1 April 2019 for a fixed period of five years. As an incentive to encourage the office space to be occupied, a first-year rent-free period was included in the agreement after which A Co is required to pay an annual lease of P360,000. How much lease should be accounted for in the year ended 31 March 2020? P0 P288,000 P360,000 P1,440,000arrow_forward
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