PROVIDE COMPUTATION! 5. Cumulative compensation expense at the end of year 1 a. P407,000 c. P430,000 b. P645,000 d. P82,500 6. Cumulative compensation expense at the end of year 2 a. P1,290,000 c. P810,000 b. P330,000 d. P822,000 7. Cumulative compensation expense at the end of year 3 a. P1,221,000 c. P1,215,000 b. P1,290,000 d. P1,500,000
PROVIDE COMPUTATION! 5. Cumulative compensation expense at the end of year 1 a. P407,000 c. P430,000 b. P645,000 d. P82,500 6. Cumulative compensation expense at the end of year 2 a. P1,290,000 c. P810,000 b. P330,000 d. P822,000 7. Cumulative compensation expense at the end of year 3 a. P1,221,000 c. P1,215,000 b. P1,290,000 d. P1,500,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 8RE: On January 2, 2019, Brust Corporation grants its new CFO 2,000 restricted share units. Each of the...
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PROVIDE COMPUTATION!
5. Cumulative compensation expense at the end of year 1
a. P407,000 c. P430,000
b. P645,000 d. P82,500
6. Cumulative compensation expense at the end of year 2
a. P1,290,000 c. P810,000
b. P330,000 d. P822,000
7. Cumulative compensation expense at the end of year 3
a. P1,221,000 c. P1,215,000
b. P1,290,000 d. P1,500,000
Transcribed Image Text:Year 2
• 35 employees have resigned by the end of year 2 and the entity expects that a further 30 will leave during
year 3.
• Earnings have increased by only 7% during year 2. Hence, the shares do not vest at the end of year 2 as
expected by the end of year 1. The entity expects that by the end of year 3, its earnings will increase by at
least 5%, thereby achieving the average of 8% per year.
Year 3
• 28 employees have resigned by the end of year 3.
• The entity's earnings have increased by 6% during year 3. This results in an average increase of 9% per year
over the three-year vesting period.
Transcribed Image Text:At the beginning of year 1, an entity grants 200 shares each to 500 employees. The grant is conditional upon the
employees remaining in the entity's employ until the performance condition described below is satisfied.
Performance Condition
The shares will vest at the end of:
Year1 - if the entity's earnings increase by 15%.
Year2 - if the entity's earnings increase by more than an average of 11% per year over the two-year period.
Year3 - if the entity's earnings increase by more than an average of 8% per year over the three-year period.
The shares have a fair value of P15 at the beginning of year 1, which equals the share price at grant date. The entity
does not expect to pay dividends over the three-year period.
The following events occurred:
Year 1
• 30 employees have left during year 1 and the entity expects, on the basis of a weighted average probability,
that a further 40 will leave during year 2.
• The entity's earnings have increased by 14% by the end of year 1 and the entity expects that the earnings will
continue to increase at a similar rate in year 2. Therefore, the entity expects that the shares will vest at the
end of year 2.
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