Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
thumb_up100%
Chapter 15, Problem 8E
1.
To determine
Prepare a schedule of Company R for the computation of its compensatory share option plan for 2019 through 2021.
2.
To determine
Prepare a
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
On January 1, 2019, Rhine Company adopts a performance-based share option plan for its 80 key executives. Each executive is granted a maximum of 70 share options, but the number of options that vest depends on the percentage increase in Rhine’s sales over a 3-year service period. If by December 31, 2021, sales have increased by at least 10%, 50 options will vest for each executive; if sales have increased by at least 15%, all 70 options will vest. On the grant date, Rhine estimates that its sales will increase by 12% over the service period, and that its employee turnover rate over the 3-year service period will be 6%. It also determines that the fair value of an option expected to vest is $13.40. At the end of 2021, actual sales had increased by 16% for the service period, and the actual turnover was 6 key executives for the service period.
1) How do you prepare a schedule of Rhine’s computations for its compensatory share option plan for 2019 through 2021?
2) Prepare the compensation…
On January 1, 2019, Kyle company established a share appreciation rights plan to key employees where they are to receive cash at any time during the next four years. The predetermined price is P40 on 60,000 share appreciation rights (SARs) of which 20,000 SARs were exercised on December 31, 2021. Market prices on the following dates are as follows: Jan. 1, 2019, P50, Dec. 31, 2019, P56, Dec. 31, 2020, P70 and P60 on Dec. 31, 2021.a. Determine the amount of compensation expense to be recognized for the year 2019, 2020 and 2021.b. Determine the amount of liability to be presented in the statement of financial position for the year ended December 31, 2019, December 31, 2020 and December 31, 2021.c. Prepare the journal entries for 2019, 2020 and 2021.
On January 1, 2021, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in 2021, 2022, 2023?
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 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_forwardAccounting Witter House is a calendar-year firm with 470 million common shares outstanding throughout 2021 and 2022. As part of its executive compensation plan, at January 1, 2020, the company had issued 45 million executive stock options permitting executives to buy 45 million shares of stock for $12 within the next eight years, but not prior to January 1, 2023. The fair value of the options was estimated on the grant date to be $2 per option. In 2021, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 25 million restricted common shares to senior executives at January 1, 2021. The shares vest four years later. The fair value of the stock was $20 per share on the grant date. The average price of the common shares was $20 and $30 during 2021 and 2022, respectively. The stock options qualify as an incentive plan. The restricted stock does not. The company's net income was $320 million and $330 million in…arrow_forwardOn January 1, 2021, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Suppose that Farmer initially estimates that it is not probable the goal will be achieved, but then after one year, Farmer estimates that it is probable that divisional revenue will increase by 5% by the end of 2023. Required:1. What is the revised estimate of the total compensation?2. What action will be taken to account for the options in 2022?3. Prepare the journal entries to record compensation expense in 2022 and 2023. 1. Estimate total compensation $600,000 2. What action will be taken to account for the options in 2022? Farmer will reflect the cumulative effect on compensation in 2022 earnings. Record compensation expense for 2022 and 2023.…arrow_forward
- 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…arrow_forwardOn January 1, 2020, ABC Company granted share options to each of the 300 employees working in the Accounting department. The options price is P90 and the par value is P70 per share.The share options vest at the end of a three-year period provided that the employees remain in the entity’s employ and provided the volume of sales will increase by 10% per year.The fair value of each share option on grant date is P35.The share will vest as follows: If the sales increase by 10%, each employee will receive 200 share options; If the sales increase by 15%, each employee will receive 300 share options.· On December 31, 2020, the sales increased by 10%, and no employees have left the entity· On December 31, 2021, sales increased by 15% and no employees have left.On December 31, 2022, the sales increased by 15% and 50 employees left the entityWhat is the share premium upon exercise of the share options on December 31, 2022?arrow_forwardOn January 1, 2020, ABC Company granted share options to each of the 300 employees working in the Accounting department. The options price is P90 and the par value is P70 per share.The share options vest at the end of a three-year period provided that the employees remain in the entity’s employ and provided the volume of sales will increase by 10% per year. The fair value of each share option on grant date is P35. The share will vest as follows: If the sales increase by 10%, each employee will receive 200 share options; If the sales increase by 15%, each employee will receive 300 share options. · On December 31, 2020, the sales increased by 10%, and no employees have left the entity· On December 31, 2021, sales increased by 15% and no employees have left.On December 31, 2022, the sales increased by 15% and 50 employees left the entityWhat is the compensation expense for 2022?arrow_forward
- Palvinder Inc. has an employee share option plan (ESOP) for its senior executives. On January 1, 2020, 20,000 options were granted under this plan. The options had an exercise price of $20 per share, and 100% of the options have vested. Details of the share option plan are as follows: When granted, the fair value of the ESOP using an appropriate option-pricing model was $120,000. On February 1, 2023, 7,000 options were exercised. The market price of Palvinder’s shares on this date was $24. On July 1, 2024, 8,000 options were exercised. The market price of Palvinder’s shares on this date was $28. The remaining options were not exercised and expired on December 31, 2025. The market price of Palvinder’s shares on this date was $19. On December 31, 2025, when the remaining options expired, what amount should have been credited to the contributed surplus — expired share options account? Assume Palvinder reports under ASPE. Question 13 options: a) $0…arrow_forwardOn October 1, 2024, Halsey Company issued stock options for 300,000 shares to a division manager. The options have an estimated fair value of $3 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 6% in three years. Halsey initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in each of the next three years? A.$0 B.$100,000 C.$300,000 D.$900,000arrow_forwardHow much is the ending balance of the Share Options Outstanding that will show in the 2024 Statement of Financial Position? Rotate Company adopted the following share-based compensation plans for its senior executives. Each senior executive has a unique plan basing on his/her functions in the company. The par value of Rotate’s ordinary share is P20. The following share-based grants were declared by the entity. On January 1, 2021, it granted 1,000 share options each to 200 of its employees. The exercise price of the option is P25. The vesting of said shares is conditional upon the employees staying for three years, after which they have two years to exercise such before the options expire. During 2021, 5 employees resigned and an additional 15 employees are expected to leave on the next two years. During 2022, actual resignations totalled 8 and another 10 is expected to resign next year. No employees left during 2023. Sixty percent of the share options were exercised at yearend 2024…arrow_forward
- On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. Theoptions have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, theoptions are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimatesthat it is probable the goal will be achieved. How much compensation will be recorded in each of the next threeyears?arrow_forwardOn January 1, 2019, Nevada Company granted share options to each of the 300 employees working in the sales department. The share options vest at the end of a 3-year period provided that the employees remain the entity’s employ and provided the volume of sales will increase by more than 10% per year. The fair value of each share option on grant date is P30. The par value per share is P50 and the option price is P60.If the sales increase by more than 10%, each employee will receive 200 share options. If the sales increase by more than 15%, each employee will receive 300 share options. On December 31, 2019, the sales increased by more than 10% but not more than 15% and no employees have left the entity. On December 31, 2020, sales increased by more than 15% and no employees have left. On December 31, 2021, the sales increased by more than 15% and 50 employees left the entity. All of the share options were exercised on December 31, 2021. What amount should be recognized as compensation…arrow_forwardOn December 31, 2016, Sedona Inc. granted 160,000 options to key executives. Each option allows the executive to purchase one common share at a price of $6. The options were exercisable beginning January 1, 2019, if the grantee was still employed by the company at the time of the exercise, and expire on December 31, 2020. On the grant date, shares were trading at $6 per share, and a fair value options pricing model determined total compensation to be $80,000. On May 1, 2019, 120,000 options were exercised when the market price of the shares was $7 per share. The remaining options lapsed on December 31, 2020 because the share price declined below $6. Assume that the entity follows IFRS. Prepare the necessary journal entries related to the stock option plan for the years ended December 31, 2016, through 2020arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning