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 7C
1.
To determine
Explain the SAR plan.
2.
To determine
Explain the key differences between accounting for a SAR plan and fixed compensatory share option plan.
3.
To determine
Concisely summarize the steps in the accounting for a SAR plan.
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Are the statemnets: both correct, both incorrect, or which one is correct?STATEMENT 1: Share options are additional compensation on the part of officers and employees. STATEMENT 2: The intrinsic value of share options is equal to carrying amount over the option price.
16. With regard to contracts that can be settled in either cash or shares
IFRS requires that share settlement must be used.
IFRS gives companies a choice of either cash or shares.
GAAP requires that share settlement must be used.
the FASB project proposes that the IASB adopt the GAAP approach, requiring that share settlement must be used.
In a share-based payment with cash and share alternatives, the net effect to the shareholders’ equity if the employee chooses the share alternative is
A.the total subscription price
B.the balance of the share options outstanding
C.the balance of the accrued salaries payable
D.zero
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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- Compensatory Share Option Plan Tom Twitlet, president of Twitlet Corporation, is considering establishing a compensatory share option plan for the companys 20 top executives. Tom wants to set the terms of the plan so that the number of options the executives can exercise increases based on a specified increase in the companys future earnings. Tom wants to make sure that the plan cannot be manipulated but, in addition, it should properly motivate the executives to stay with the company and make it successful. Given this concern, he wants to know how the increase in earnings should be specified: Should it be a dollar amount or a percentage change, and should the change in earnings be compared to the companys past results or against industry results? He also is interested in understanding how to determine the service period of the plan. Finally, Tom wants to understand the accounting for the plan and how it will affect the companys financial statements. Required: Prepare a memo to Tom that briefly explains the issues involved in specifying the terms used in the plan and accounting for the terms of this type of compensatory share option plan.arrow_forwardWhich of the following statement about a rights issue is correct? a. The share price can be expected to increase on the ex-rights date b. On the ex-rights date the rights separate from the share c. The subscription price is usually greater than the market price d. A rights issue is offered to an investor whether they are an existing shareholder or not e. If you buy shares cum-rights you are not entitled to participate in the rights issuearrow_forwardA rights offering that gives existing target shareholders the right to buy shares in either the target or the acquirer at a deeply discounted price once certain conditions are met is called a:arrow_forward
- Non-market based performance conditions include vesting based on achieving all of the following except a achieving a specific growth in revenue b achieving a specific growth in net profit c achieving a specific increase in EPS d achieving a specific target share price Statement 1: Share options granted that vest base on performance condition to the key employees of the business wherein they need to achieve an increase in the share price will recognize fully the compensation expense over the vesting period regardless the condition is met or not.Statement 2: Share options that are granted without fair value on the grant date will recognize compensation expense within the vesting period only. a True,False b False, True c True, true dFalse, false All of the following are correct,except Share options outstanding: equity Share appreciation rights: liability Compensation expense: recognize until exercise when no fair value of share options on grant…arrow_forwardShare option is the best example of this kind of share-based compensation plan:arrow_forwardplease explain why the option is correct and remaining incorrect Under IFRS 2, with respect to choice-of-settlement share-based payments, if it is the entity that has the right to choose between equity settlement and cash settlement, when must the entity choose the cash settlement? Group of answer choices If the entity has a present obligation to settle in cash If the supplier provides goods The entity always has the option to choose either method. If the supplier provides servicesarrow_forward
- In a share-based payment with cash and share alternatives, the net effect to the shareholders’ equity if the employee chooses the cash alternative is the balance of the accrued salaries payable the balance of the share options outstanding zero the total subscription pricearrow_forwardThe Issue of share of a company to only investors of our choice is known as; a. Offer for sale b. Right issues c. Public issue d. Private Placementarrow_forwardA share-based payment transaction with cash alternative whereby the right of choice of settlement is given to the employee is accounted for as A.partly cash-settled and equity-settled B. equity-settled C. either cash-settled or equity-settled, but not both D. cash-settledarrow_forward
- Which of the following statement is true? a. In brokered markets, buyers and sellers confront each other directly and bargain over price. b. Primary market is the market for trading outstanding securities. c. Preference shareholders have a higher priority claim on company’s assets than ordinary shareholders in the event of insolvency. d. Ordinary shareholders receive fixed dividend payments.arrow_forwardPlease answer with reason for all why the option is correct and why the other options are incorrectPlease answer correct otherwise skip it The most recent example of the political process at work in standard-setting is the controversy surrounding the: A. Creation of the FASB. B. Accounting for employee stock options. C. FASB Accounting Standards Codification. D. Implementation of the fair value standard.arrow_forward1.) When share options issued to employees are exercised, the entity shall: a. recognize a loss for the unamortized balance b. make a transfer among equity components c. recognize a gain for the unamortized balance d. do nothing 2.) A share-based payment transaction with cash alternative whereby the right of choice of settlement is retained by the entity is accounted for as: a. either cash-settled or equity-settled, but not both b. equity-settled c. partly cash-settled and equity-settled d. cash-settled 3.) A share-based payment transaction with cash alternative whereby the right of choice of settlement is given to the employee is accounted for as: a. cash-settled b. either cash-settled or equity-settled, but not both c. partly cash-settled and equity-settled d. equity-settledarrow_forward
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