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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Question
Chapter 15, Problem 3C
1.
To determine
Compare and differentiate the accounting at the date the stock is issued for the non-compensatory share option plan with that for a compensatory share option plan
2.
To determine
Identify the journal entry that should be recorded for the compensatory share option plan at the date of the grant.
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These are distributions of the earnings of the corporation in the form of the corporation's own shares. *
It is the procedure of restating assets, liabilities and share capital balances at its fair value for the purpose of eliminating deficit. *
Share option is the best example of this kind of share-based compensation plan. *
The date the liability for dividends must be recognized *
Statement 1: Upon issue of share rights, the issuing corporation records the transaction by preparing a journal entry to recognize the additional number of shares that may be acquired through the exercise.Statement 2: When preference shares are issued with detachable warrants, the proceeds should be allocated between the preference shares and the warrants based on the fair values of the two securities at the time of issuance.
a) Both statements are true.
b) Both statements are false.
c) Statement I is true; Statement II is false.
d) Statement I is false; Statement II is true.
Discuss the accounting treatment, if any, that should be given to each of the following items in computing earnings per share of ordinary shares for financial statement reporting. a) Outstanding preference shares issued at a premium with a par value liquidation right. b) The exercise at a price below market value but above book value of an ordinary share option issued during the current fiscal year to officers of the corporation. c) The replacement of a machine immediately prior to the close of the current fiscal year at a cost 20% above the original cost of the replaced machine. The new machine will perform the same function as the old machine that was sold for its book value. d) The declaration of current dividends on cumulative preference shares. e) The acquisition of some of the corporation's outstanding ordinary shares during the current fiscal year. The shares were classified as treasury shares. f) A 2-for-1 share split of ordinary shares during the current fiscal year. g) A…
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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- Treasury Stock For numerous reasons, a corporation may reacquire shares of its own capital stock. When a corporation purchases treasury stock, it has two options as to how to account for the shares: (1) the cost method and (2) the par value method. Required: Write a short report that compares and contrasts the cost method with the par value method for each of the following: 1. Purchase of shares at a price less than par value. 2. Purchase of shares at a price greater than par value. 3. Subsequent resale of treasury shares at a price less than purchase price, but more than par value. 4. Subsequent resale of treasury shares at a price greater than both purchase price and par value. 5. Effect on net income.arrow_forwardPreferred stock that may be retired by the corporation at its option is known as: a. convertible b. redeemable c. cumulative d. callablearrow_forwardWhich of the following is True for Bonus Issue of Shares? a. It is an offer of new shares in the company and it will be distributed to the public for subscription. b. It is an offer of new shares in the company and it will be distributed to the board of directors c. It is an offer of new shares and it will be distributed to the existing shareholder at free of cost. d. It is not an offer and it will be distributed to the existing shareholder as per the market valuearrow_forward
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- The following are a list of terms. ______ 1) Additional paid in capital ______ 2) Authorized capital stock ______ 3) Legal capital ______ 4) Preemptive right ______ 5) Registrar ______ 6) Stated value ______ 7) Subscribed capital stock ______ 8) Transfer agent ______ 9) Treasury stock ______ 10) Voting right Required:Match the following definition with the terms listed above. a) Installment purchase contract with an investor. b) An independent party hired to handle the stock issuance. c) Maintains the shareholders records. d) The ability to elect directors. e) Maintains a proportionate share of ownership. f) Shares authorized by state charter. g) Stocks that were issued and reacquired by the corporation. h) To protect the corporations creditors. i) No-par value j) The excess received is recorded in this account.arrow_forwardWhich statement is incorrect regarding equity-settled share-based payment transactions? A. the issuance of shares to employees with say, a two year vesting period is considered to relate to services over the vesting period. B. the issuance of shares or rights to shares requires an increase in a component of equity C. the fair value of a share-based payment transaction is determined at the date of exercise. D. the issuance of fully vested shares, or rights to shares, is presumed to relate to past service, requiring the full amount of the grant-date fair value to be expensed immediately. Provided the specified vesting conditions, if any, are met, share-based payment arrangement is an agreement between the entity and another party that entities the other party to receive A. equity instruments of the entity or another group entity B. none of the choices C. receives goods or services from the supplier of those goods or services in a…arrow_forwardWhich of the following correctly indicates how the issue price of common stock shares would be valued when a corporation makes a follow-on issue? Market forces determine the selling price, as it is marketed by the selling group The highest expected issue price per share that can be obtained while still selling of all of the shares is selected The highest expected issue price per share that can be obtained, regardless of the selling group's ability to market the shares, is selected The market price of existing shares is used as guidancearrow_forward
- A company issued rights to its existing shareholders to purchase ordinary shares. When the rights are exercised, share premium would be credited if the par value was the same as the purchase price but less than the fair value at the date of exercise exceeded the purchase price was less than the purchase price was the same as the purchase pricearrow_forwardAccording to IFRS, once the total compensation is measured at the date of grant A. It can be changed in future periods related to a change in market conditions B. It can be changed to reflect the rise or fall in the market price of the company's ordinary shares C. A company is permitted to adjust tge number of share options expected to the actual number of instruments vested D. All of the choices are correctarrow_forwardWhich statement is true regarding the accounting treatment for convertible preferred shares under IFRS? Question 21 options: a) Convertible preferred shares are initially measured at the fair value of the cash or other asset received. b) At conversion, a gain or loss is recognized on the difference between the carrying value of the equity portion of the shares and the fair value. c) Convertible preferred shares are subsequently measured at fair value. d) The liability and equity elements of convertible preferred shares must be presented separately on the statement of financial position.arrow_forward
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