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 6P
1.
To determine
Prepare the schedule to compute the Compensation expense related to the given SAR plan for 2019 to 2023.
2.
To determine
Prepare the
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Holden 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…
PROBLEM 3
: At the beginning of Year 1, an entity grants 1,000 share options to 50 employees. The share options will vest at the end of Year 3, provided the employees remain in service until then. The share options have a life of 10 years. The exercise price is 60 and the entity’s share price is also P60 at the end of the grant. The entity’s share price have a par value of P20.At the date of grant, the entity concludes that it cannot estimate reliably the fair value of the share options granted. At the end of Year 1, three employees have ceased employment and the entity estimates that a further seven employees will leave during Years 2 and 3. Hence, the entity estimates that 80% of the share options will vest. Two employees leave during Year 2, and the entity revises its estimate of the number of share options that it expects will vest to 86%. Two employees leave during year 3. Hence, 43,000 share options vested at the end of year 3.The entity’s share price during Years 1 to 10, and…
PROBLEM 3
: At the beginning of Year 1, an entity grants 1,000 share options to 50 employees. The share options will vest at the end of Year 3, provided the employees remain in service until then. The share options have a life of 10 years. The exercise price is 60 and the entity’s share price is also P60 at the end of the grant. The entity’s share price have a par value of P20.At the date of grant, the entity concludes that it cannot estimate reliably the fair value of the share options granted. At the end of Year 1, three employees have ceased employment and the entity estimates that a further seven employees will leave during Years 2 and 3. Hence, the entity estimates that 80% of the share options will vest. Two employees leave during Year 2, and the entity revises its estimate of the number of share options that it expects will vest to 86%. Two employees leave during year 3. Hence, 43,000 share options vested at the end of year 3.The entity’s share price during Years 1 to 10, and…
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_forwardRestricted Share Units On January 2, 2019, Dekker Company grants each of its 15 new employees 200 restricted share units. Each of the time-vested restricted share units entitles the employee to receive one share of Dekker common stock if they remain an employee of the company for 2 years. On January 2, 2019, shares of Dekkers 2 par value common are trading at 52 per share. Dekker estimates that 12 of the 15 employees will complete 2 years of service with the company. At the end of 2020, Dekker reported that four employees left the company before completing the service period. Required: 1. Prepare a schedule of Dekker s computations for its restricted share unit plan for 2019 and 2020 (round all computations to the nearest dollar). 2. Prepare all journal entries for the restricted share unit plan for 2019 and 2020.arrow_forwardShow the complete solution On January 1,20x1, Mimosa Company grants 10,000 with a 10-year life to each of the 12 senior executives. The share options will vest and become exercisable if and when the entity’s share price increases from P50 to P70, provided that the executive remains in service until the share price target is achieved. Mimosa applies the binomial option pricing model, which considers the possibility that the share target will be achieved during the ten-year life of the options, and the possibility that the target will not be achieved. Mimosa estimates that the fair value of the share options at grant date is P27 per option. From the option pricing model, Mimosa determines that the mode of the distribution of possible vesting dates is five (5) years. In other words, of all the possible outcomes, the most likely outcome of the market condition is that the share price target will be achieved at the end of 20x5. Therefore, Mimosa estimates that the expected vesting period is…arrow_forward
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- 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:…arrow_forwardPlease answer asap.Both a and b Earth Ltd grants 80 share options to each of its 200 employees. Each grant is conditional on the employee working for the company for 3 years following the grant date. On grant date, the fair value of each share option is estimated to be $12. Based on a weighted average probability, the company estimates that 20% of its employees will leave during the 3-year vesting period. During year 1, 15 employees left, and the company revises its estimate of total employee departures over the full 3-year period from 20% to 22%. During year 2, seven employees left, and the company revises its estimate of total employee departures over the full 3-year period from 22% to 15%. During year 3, a further four employees left. Required: a. Prepare a schedule setting out the annual and cumulative remuneration expense for years 1-3 b. Give the journal entry in year 1.arrow_forward(Stock-Appreciation Rights) Capulet Company establishes a stock-appreciation rights program that entitles its new president Ben Davis to receive cash for the difference between the market price of the stock and a pre-established price of $30 (also market price) on December 31, 2013, on 30,000 SARs. The date of grant is December 31, 2013, and the requiredemployment (service) period is 4 years. President Davis exercises all of the SARs in 2019. The fair value of the SARs is estimated to be $6 per SAR on December 31, 2014; $9 on December 31, 2015; $15 on December 31, 2016; $6 on December 31, 2017; and $18 on December 31, 2018.Instructions(a) Prepare a 5-year (2014–2018) schedule of compensation expense pertaining to the 30,000 SARs granted president Davis.(b) Prepare the journal entry for compensation expense in 2014, 2017, and 2018 relative to the 30,000 SARs.arrow_forward
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