INTERMEDIATE ACCOUNTING(LL) W/CENGAGENO
2nd Edition
ISBN: 9781305617001
Author: WAHLEN
Publisher: CENGAGE L
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Chapter 15, Problem 12C
To determine
Explain the manner Person Y reply to the president of Corporation S from financial reporting and ethical perspectives.
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First Link Services granted 6 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $24 per share on the grant date of the restricted stock award. 1. Ignoring taxes, what is the total compensation cost pertaining to the restricted shares?2. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?
PROBLEM 1
An entity grants 100 share options to each of its 500 employees. Each grant is conditional upon the employee working for the entity over the next three years. The entity estimates that the fair value of each share option is P20. On the basis of a weighted average probability, the entity estimates that 30% of employees will leave during the three-year period and therefore forfeit their rights to the share options.During Year 1, 25 employees leave. The entity revises its estimate of total employee departures over the three-year period from 25% to 20%. During Year 2, a further 27 employees leave. The entity revises its estimate of total employee departures over the three-year period from 20% to 15%. During Year 3, a further 20 employees leave. Hence, a total of 72 employees forfeited their rights to the share options during the three-year period.
1. The total shareholders’ equity at the end of Year 1 would have increased (decreased), as a result of the grant, by:…
First Link Services granted 5.8 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within five years. The common shares have a market price of $20 per share on the grant date of the restricted stock award. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?
Chapter 15 Solutions
INTERMEDIATE ACCOUNTING(LL) W/CENGAGENO
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 - Prob. 2MCCh. 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 - Prob. 7RECh. 15 - Prob. 8RECh. 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 - Prob. 9ECh. 15 - Prob. 10ECh. 15 - Prob. 11ECh. 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 - Prob. 16ECh. 15 - Treasury Stock, Cost Method (and IFRS Revaluation)...Ch. 15 - Treasury Stock, Cost and Par Value Methods On...Ch. 15 - Treasury Stock, No Par Propst-Steele Production...Ch. 15 - Prob. 1PCh. 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 - Prob. 9PCh. 15 - Comprehensive The shareholders equity section of...Ch. 15 - Prob. 11PCh. 15 - Comprehensive Byrd Companys Contributed Capital...Ch. 15 - Prob. 13PCh. 15 - Prob. 14PCh. 15 - Reconstruct Journal Entries At the end of its...Ch. 15 - Prob. 16PCh. 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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- 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 2020 annual report Note 18 Employee Stock and Savings Plans (in part) Stock awards entitle the holder to receive shares of Microsoft common stock as the award vests. Stock awards generally vest over a five-year period... During fiscal year 2020, the following activity occurred under our plans: Stock awards: Nonvested balance, beginning of year Granted Vested Forfeited Nonvested balance, end of year Shares (in millions) 147 53 (65) 126 Weighted Average Grant-Date Fair Value $ 78.49 140,49 75.35 90.30 $ 105.23 Required: If all awards are granted, acquired, vested, and forfeited evenly throughout the year, what is the compensation expense in fiscal 2020 pertaining to the previous and current stock awards? Assume forfeited shares were granted evenly throughout the three previous…arrow_forwardSecond Link Services granted restricted stock units (RSUs) representing 16 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $10 per share on the grant date. Ignoring taxes, what is the total compensation cost pertaining to the restricted stock units? What is the effect on earnings in the year after the shares are granted to executives?arrow_forwardFX Services granted 16.0 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. The common shares have a market price of $9 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives? Note: Round your answer to 1 decimal place.arrow_forward
- 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 2020 annual report: Note 18 Employee Stock and Savings Plans (in part) Stock awards entitle the holder to receive shares of Microsoft common stock as the award vests. Stock awards generally vest over a five-year period.... During fiscal year 2020, the following activity occurred under our plans: Stock awards: Nonvested balance, beginning of year. Granted Vested Forfeited Nonvested balance, end of year Shares (in) millions) 147 53 (65) (9) Compensation expense in fiscal 2020 126 Weighted Average Grant-Date Fair Value $78.49 140.49 75.35 90.30 $ 105.23 Required: If all awards are granted, acquired, vested, and forfeited evenly throughout the year, what is the compensation expense in fiscal 2020 pertaining to the previous and current stock awards? Assume forfeited shares were…arrow_forward16. During Year One, Hancock Corporation buys 2,000 shares of Waltz Inc. for P34 per share. Hancock appropriately records this acquisition as an investment in trading securities because it plans to make a sale in the near future. In December of Year One, Waltz pays a P1 per share cash dividend to its owners. On the last day of December, the stock is selling on a stock exchange for P39 per share. What is the impact of these events on the income reported by Hancock for Year One? O a. No effect O b. Increase of P2,000 c. Increase of P10,000 d. Increase of P12,000arrow_forwardMicrosoft provides compensation to executives in the form of a variety of incentive compensation plans, including restricted sto award grants. The following is an excerpt from a disclosure note from Microsoft's 2020 annual report: Note 18 Employee Stock and Savings Plans (in part) Stock awards entitle the holder to receive shares of Microsoft common stock as the award vests. Stock awards generally vest o five-year period.... During fiscal year 2020, the following activity occurred under our plans: Stock awards: Nonvested balance, beginning of year Granted Vested Forfeited Nonvested balance, end of year Required: Shares (in millions) 147 53 Weighted Average Grant-Date Fair Value $ 78.49 140.49 75.35 (65) (9) 126 90.30 $ 105.23 If all awards are granted, acquired, vested, and forfeited evenly throughout the year, what is the compensation expense in fiscal pertaining to the previous and current stock awards? Assume forfeited shares were granted evenly throughout the three previou years.…arrow_forward
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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, 2018, 20 million options were granted, each giving the executive owning them the right to acquire six $1 par common shares. • The exercise price is the market price on the grant date-$10 per share. • Options vest on January 1, 2022. They cannot be exercised before that date and will expire on December 31, 2024. • The fair value of the 20 million options, estimated by an appropriate option pricing model, is $40 per option. Ignore income tax. On March 1, 2022, when the market price of Wilson's stock was $14 per share, 3 million of the options were exercised. The journal entry to record this would include: A debit to paid-in capital-stock options for $120 million All of these answer choices are correct A credit to common stock for $75 million A credit to paid-in capital-excess of par for $255 millionarrow_forwardHolden Company has a share appreciation rights plan for its key executives. This SAR plan gives each qualifying executive the right to receive cash, stock, or a combination of both equal to the excess of the quoted market price over the option price of the company’s $10 par common stock on the date of exercise. The key characteristics and requirements of this SAR plan are as follows: • Option price: Market price on date of grant • Service period: 4 years • Exercise limit: Within 6 years after the service period has expired On January 1, 2019, Sarah Mendelson was granted SAR to 10,000 shares of the company’s common stock under the requirements of the SAR plan. She is expected to complete the service period and receive cash on the date of exercise. On December 31, 2019, Mendelson exercised her rights to receive $27,000 cash and the remainder in common stock. The fair value per SAR was as follows: 12/31/19, $4.00; 12/31/20, $4.10; 12/31/21, $3.80; 12/31/22, $5.50; and…arrow_forwardProblem 24. On January 1, 2015, ID Inc. granted to an employee the right to choose either:a. 12,000 share (Share or Equity Alternative) (Share options)b. Cash payment equal to market value of 10,000 shares (Cash Alternative) (Share appreciation rights)The grant is conditional upon the completion of three years of service. If the employee chooses the share alternative, the shares must be held for three years after vesting date.The par value of the shares is P25 and at grant date on January 1, 2015, the share price is P51.The share prices for the three-year vesting period are P54 on December 31, 2015, P60 on December 31, 2016 and P65 on December 31, 2017.After taking into account the effects of post-vesting restrictions, the entity has estimated that the fair value of the share or equity alternatives is P48 per share.Required: Based on the result of your audit, determine the following:__________1. Compensation expense for year 2015__________2. Compensation expense for year…arrow_forward
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