Microsoft provides compensation to executives in the form of a variety of incentive compensation plans, including restricted stockaward grants. The following is an excerpt from a disclosure note from Microsoft's 2017 annual report:Note 20 Employee Stock and Savings Plans (in part)Stock awards are grants that entitle the holder to shares of common stock as the award vests. Our stock awards generally vest over afive-year period.... During fiscal year 2017, the following activity occurred under our plans:WeightedSharesAverage($ inGrant-Datemillions)Fair ValueStock awards:Nonvested balance,beginning of yearGrantedAssumed in acquisitions194$36.928455.642359.0937.36Vested(80)(20)Forfeited43.71Nonvested balance, end of year201$ 46.32Required:If all awards are granted, acquired, vested, and forfeited evenly throughout the year, what is the compensation expense in fiscal 2017pertaining to the previous and current stock awards? Assume forfeited shares were granted evenly throughout the three previousyears

Employee stock options = $194 million value of shares Number of stock options = $194 million/$10…

Microsoft provides compensation to executives in the form of a variety of incentive compensation plans, including restricted stock award grants. The following is an excerpt from a disclosure note from Microsoft's 2017 annual report: Note 20 Employee Stock and Savings Plans (in part) Stock awards are grants that entitle the holder to shares of common stock as the award vests. Our stock awards generally vest over a five-year period.... During fiscal year 2017, the following activity occurred under our plans: Shares ($ in millions) Weighted Average Grant-Date Fair Value Stock awards: Nonvested balance, beginning of year Granted Assumed in acquisitions Vested 194 $36.92 84 55.64 23 59.09 (80) (20) 37.36 Forfeited 43.71 Nonvested balance, end of year 201 $46.32 Required: If all awards are granted, acquired, vested, and forfeited evenly throughout the year, what is the compensation expense in fiscal 2017 pertaining to the previous and current stock awards? Assume forfeited shares were granted evenly throughout the three previous

Microsoft provides compensation to executives in the form of a variety of incentive compensation plans, including restricted stock award grants. The following is an excerpt from a disclosure note from Microsoft's 2017 annual report: Note 20 Employee Stock and Savings Plans (in part) Stock awards are grants that entitle the holder to shares of common stock as the award vests. Our stock awards generally vest over a five-year period.... During fiscal year 2017, the following activity occurred under our plans: Shares ($ in millions) Weighted Average Grant-Date Fair Value Stock awards: Nonvested balance, beginning of year Granted Assumed in acquisitions Vested 194 $36.92 84 55.64 23 59.09 (80) (20) 37.36 Forfeited 43.71 Nonvested balance, end of year 201 $46.32 Required: If all awards are granted, acquired, vested, and forfeited evenly throughout the year, what is the compensation expense in fiscal 2017 pertaining to the previous and current stock awards? Assume forfeited shares were granted evenly throughout the three previous

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2018, ABC, Inc. initiated two compensation plans for its employees: · Granted 25,000 Stock Appreciation Rights (SARs) subject to forfeiture if the president leaves or is fired from the company before December 31, 2021. The company can choose to liquidate the commitment with shares only. · Granted 50,000 units of restricted common shares (RSUs) subject to forfeiture if the executive leaves or is fired from the company before December 31, 2021. The employee may elect to receive the cash instead of the shares at the time of exercising the units (RSUs). The market value of ABC's common stock was $ 5 on 1/1/18 and $ 7 on 12/31/18. ABC's common stock is worth $ 1 par. The fair value of the SARs on 1/1/18 was $ 5.5 and as of 12/31/18 it was $ 9. Yes or no: ABC Inc. will have to reevaluate as of 12/31/18 any debt related to these compensation plans in the event of Select one: to. Yes, in the case of SARs. b. None of the above. c. Yes, in the case of RSUs. d. Yes, both for SARs…
Witter House is a calendar-year firm with 300 million common shares outstanding throughout 2016 and 2017. As part of its executive compensation plan, at January 1, 2015, the company had issued 30 million executive stock options permitting executives to buy 30 million shares of stock for $10 within the next eight years, but not prior to January 1, 2018. The fair value of the options was estimated on the grant date to be $3 per option. In 2016, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 15 million restricted common shares to senior executives at January 1, 2016. The shares vest four years later. The fair value of the stock was $12 per share on the grant date. The average price of the common shares was $12 and $15 during 2016 and 2017, respectively. The stock options qualify for tax purposes as an incentive plan. The restricted stock does not. The company’s net income was $150 million and $160 million…
As part of its stock-based compensation package, International Electronics granted 24 million stock appreciation rights (SARs) to top officers on January 1, 2016. At exercise, holders of the SARs are entitled to receive cash or stock equal in value to the excess of the market price at exercise over the share price at the date of grant. The SARs cannot be exercised until the end of 2019 (vesting date) and expire at the end of 2021. The $1 par common shares have a market price of $46 per share on the grant date. The fair value of the SARs, estimated by an appropriate option pricing model, is $3 per SAR at January 1, 2016. The fair value re-estimated at December 31, 2016, 2017, 2018, 2019, and 2020, is $4, $3, $4, $2.50, and $3, respectively. All recipients are expected to remain employed through the vesting date. Required: 1. Prepare the appropriate journal entry to record the award of SARs on January 1, 2016. 2. Prepare the appropriate journal entries pertaining to the SARs on December…
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Wilson Inc. developed a business strategy that uses stock options as a major compensation incentive for its top executives. On January 1, 2021, 20 million options were granted, each giving the executive owning them the right to acquire five $1 par common shares. The exercise price is the market price on the grant date—$10 per share. Options vest on January 1, 2025. They cannot be exercised before that date and will expire on December 31, 2027. The fair value of the 20 million options, estimated by an appropriate option pricing model, is $40 per option. Ignore income tax.Wilson's compensation expense in 2021 for these stock options was: $800 million. $200 million. $400 million. $0.
Arts Corporation offers a generous employee compensation package that includes employee stock options. The exercise price has always been equal to the market price of the stock at the date of grant. The corporate controller, John Jones, believes that employee stock options, like all obligations to issue the corporation's own stock, are equity. The new staff accountant, Marcy Means, disagrees. Marcy argues that when a company issues stock for less than current value, the value of preexisting stockholders' shares is diluted. Pretend you are hired to debate the issues of the proper treatment of opinions written on a company's own stock. Formulate your argument, citing concepts and definitions to buttress your case, assuming: i. You are siding with John
As part of its stock-based compensation package, International Electronics granted 24 million stock appreciation rights(SARs) to top officers on January 1, 2016. At exercise, holders of the SARs are entitled to receive stock equal in valueto the excess of the market price at exercise over the share price at the date of grant. The SARs cannot be exerciseduntil the end of 2019 (vesting date) and expire at the end of 2021. The $1 par common shares have a market price of$46 per share on the grant date. The fair value of the SARs, estimated by an appropriate option pricing model, is $3 perSAR at January 1, 2016. The fair value reestimated at December 31, 2016, 2017, 2018, 2019, and 2020, is $4, $3, $4,$2.50, and $3, respectively. All recipients are expected to remain employed through the vesting date.Required:1. Prepare the appropriate journal entry to record the award of SARs on January 1, 2016. Will the SARs bereported as debt or equity?2. Prepare the appropriate journal entries…
As part of its executive compensation plan, Vertovec Inc. granted 54,000 of its no par common shares to executives, subject to forfeiture if employment is terminated within three years. Vertovec’s common shares havea market price of $5 per share on January 1, 2017, the grant date of the restricted stock award, as well as onDecember 31, 2018. 800,000 shares were outstanding at January 1, 2018. Net income for 2018 was $120,000.Required:Compute Vertovec’s basic and diluted earnings per share for the year ended December 31, 2018
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