Intermediate Accounting: Reporting and Analysis, 2017 Update
2nd Edition
ISBN: 9781337116619
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 6C
1.
To determine
Explain the manner Corporation G would determine the compensation expense for the share option plan in 2016.
2.
To determine
Explain the effect of forfeiture of the share options on Corporation G’s financial statements for 2017.
3.
To determine
Explain the effect of the share option plan on the balance sheet at December 31, 2018. Explain specifically as to the changes in balance sheet accounts between November 6, 2015, and December 31, 2018.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On January 1, 2014 share options were granted to employees where they can purchase 100,000 ordinary shares of $90 par at $100 per share. The fair value of the share options is $40 per share. The senior officers are entitled to the share options only after completing two years of service. The options can be exercised starting January 1, 2016 and shall expire on December 31, 2016. What is the compensation expense recorded on December 31, 2015?
In order to retain certain key executives, Sheridan Company granted them incentive stock options on December 31, 2020. 144000 options were granted at an option price of $35 per share. Market prices of the stock were as follows:
December 31, 2021$44 per share
December 31, 202249 per share
The options were granted as compensation for executives’ services to be rendered over a two-year period beginning January 1, 2021. The Black-Scholes option pricing model determines total compensation expense to be $1508000. What amount of compensation expense should Sheridan recognize as a result of this plan for the year ended December 31, 2021 under the fair value method?
A. $1508000
B. $2633000
C. $754000
D. $1658000
Recording Entries for Restricted Stock Unit Plan with Estimated Forfeitures
On December 31, 2020, 5M Inc. approved a restricted stock unit plan to be awarded to executives. The plan included the following general terms.
Each restricted stock unit is equivalent to one share of $1 par value, common stock of 5M Inc.
Restricted stock units vest three years after the date of grant, subject to forfeiture if employment is terminated prior to the end of the vesting period.
Shares are distributed after the vesting period if the employee is still employed by the company.
On December 31, 2020, 90,000 restricted stock units were granted to key employees under this plan when the market price of the common stock was $25 per share. The company estimates that 15% of the restricted stock units will be forfeited and it is the company's policy to estimate forfeitures.
Required
a. Compute the total amount of compensation cost for the restricted stock unit plan. $Answer
b. Prepare the…
Chapter 15 Solutions
Intermediate Accounting: Reporting and Analysis, 2017 Update
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
Knowledge Booster
Similar questions
- Recording Entries for Restricted Stock Unit Plan with Estimated Forfeitures On December 31, 2020, 5M Inc. approved a restricted stock unit plan to be awarded to executives. The plan included the following general terms. Each restricted stock unit is equivalent to one share of $1 par value, common stock of 5M Inc. Restricted stock units vest three years after the date of grant, subject to forfeiture if employment is terminated prior to the end of the vesting period. Shares are distributed after the vesting period if the employee is still employed by the company. On December 31, 2020, 36,000 restricted stock units were granted to key employees under this plan when the market price of the common stock was $25 per share. The company estimates that 15% of the restricted stock units will be forfeited and it is the company's policy to estimate forfeitures. Required a. Compute the total amount of compensation cost for the restricted stock unit plan. $Answer b. Prepare the journal…arrow_forwardRecording Entries for Restricted Stock Unit Plan with Estimated Forfeitures On December 31, 2020, 5M Inc. approved a restricted stock unit plan to be awarded to executives. The plan included the following general terms. Each restricted stock unit is equivalent to one share of $1 par value, common stock of 5M Inc. Restricted stock units vest three years after the date of grant, subject to forfeiture if employment is terminated prior to the end of the vesting period. Shares are distributed after the vesting period if the employee is still employed by the company. On December 31, 2020, 90,000 restricted stock units were granted to key employees under this plan when the market price of the common stock was $25 per share. The company estimates that 15% of the restricted stock units will be forfeited and it is the company's policy to estimate forfeitures. d. Prepare the journal entry on December 31, 2022. At that time, the company adjusts its estimate of forfeitures to 10%. e.…arrow_forwardMoonlnc. granted their executives incentive stock options on January 1, 2017. On this date, 275,000 shares of the company's $5 par value common stock were granted at an option price of $40 per share. On the grant date, the market price of the stock was $50 per share. Market prices of the stock were as follows: December 31, 2018 December 31, 2019 The Black-Scholes option pricing model determines total compensation expense to be $1,500,000. The service period for the options is 2 years. The options were exercisable beginning on January 1, 2025 for employees still working at Moonlnc. The options expire on December 31, 2029. What journal entry should the company make on January 1, 2023 under the fair value method? On June 1, 2025, 68,750 options were exercised and the market price on this date was $75. What amount should be debited to Paid-in Capital - Stock Options? a)$375,000 b)$750,000 c)$0.00 d)$1,656,250 $70 per share $82 per sharearrow_forward
- In order to retain certain key executives, Wildhorse Corporation granted them incentive stock options on December 31, 2024. A total of 152000 options were granted at an option price of $35 per share. Market prices of the stock were as follows: December 31, 2025 December 31, 2026 The options were granted as compensation for executives' services to be rendered over a two-year period beginning January 1, 2025. The Black-Scholes option-pricing model determined total compensation expense to be $1501000. $44 per share 49 per share What amount of compensation expense should Wildhorse recognize as a result of this plan for the year ended December 31, 2025 under the fair value method? O $750500 $1653000 $1501000 $2622950arrow_forwardSubject: accounting On January 1, 2019, QRS Company granted 80,000 stock options to certain executives. The option vesting period is 4 years ending on December 31, 2022. Each option can be exercised to acquire one share of $1 par common stock for $5. The fair value of each option was estimated to be $3 on the grant date. What amount should QRS recognize as compensation expense for 2020?arrow_forwarda) On 1 January 2017, Gyamera Limited granted 100 share options to each of its 300 employees, with each of the share options being conditional upon the employee working for Gyamera Limited until 31 December 2019. At the grant date, the FV of each share option was GHC15.00. During 2017, 15 employees left Gyamera Limited and the company’s directors estimated that a total of 20% of the 300 employees would leave during the three-year period 2017-2019. At the beginning of 2018, Gyamera Limited modified the terms and conditions of the share option by reducing the exercise price. This had the effect of increasing the FV of a share option at the beginning of 2018 by GHC9.00. During 2018, a further six employees left the company and the directors revised their estimate of the total number of the 300 employees to 15% that would leave the company during the three-year period 2017-2019. During 2019, a further five employees left the company. Required; Calculate the remuneration expense that should…arrow_forward
- Recording Entries for Restricted Stock Unit Plan In late 2020, the board of directors of Arches Corp. approved a restricted stock unit plan to be awarded to select employees. The plan included the following general terms. Each restricted stock unit is equivalent to one share of $5 par value, common stock of Arches Corp. The restricted stock units vest two years after the date of the grant. Shares are distributed after the vesting period if the employee is still employed by the company. On December 31, 2020, 15,600 restricted stock units were granted to key employees under this plan when the market price of the common stock was $18 per share. Required a. Compute the total amount of compensation cost for the restricted stock unit plan.b. Prepare the journal entry on the date of grant, December 31, 2020.c. Prepare the journal entry on December 31, 2021.d. Prepare the journal entry on December 31, 2022, including the issuance of the shares of stock. Note: If a journal entry isn't…arrow_forwardThe first financial instrument was a compensatory stock option plan that was granted to 12 key management positions for the first time. The company wanted to provide these employees with additional compensation and due to financial constraints could not increase salaries. The plan granted these management employees 7,500 options each to purchase shares at $40 each when they were actually worth $80. The options were granted on January 1, 2021 and were exercisable within a two year period beginning January 1, 2023 if the employee was still employed with the company at the time of exercise. A fair value options pricing model determined total compensation to be $820,000. Assume that there are no forfeitures. On January 1, 2023, two employees exercised the options. A)Show the journal entries for December 31, 2021, December 31, 2022, January 1, 2023 for ASPE and IFRS. If the entries are the same under ASPE and IFRS you can just state they are the same. The second financial instrument…arrow_forwardOn January 1, 2021, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2023, and expire on January 1, 2027. Each option can be exercised to acquire one share of $1 par common stock for $12. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. If unexpected turnover in 2022 caused the company to estimate that 10% of the options would be forfeited, what amount should M recognize as compensation expense for 2022? O $30,000. O $60,000. O $120,000. O $150,000.arrow_forward
- LCI Cable Company grants 1 million performance stock options to key executives at January 1, 2016. The options entitle executives to receive 1 million of LCI $1 par common shares, subject to the achievement of specific financial goals over the next four years. Attainment of these goals is considered probable initially and throughout the service period. The options have a current fair value of $12 per option. Required: 1. Prepare the appropriate entry when the options are awarded on January 1, 2016. 2. Prepare the appropriate entries on December 31 of each year 2016–2019. 3. Suppose at the beginning of 2018, LCI decided it is not probable that the performance objectives will be met. Prepare the appropriate entries on December 31 of 2018 and 2019.arrow_forwardOn November 1, 2017, Windsor Company adopted a stock-option plan that granted options to key executives to purchase 19,000 shares of the company’s $10 par value common stock. The options were granted on January 2, 2018, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $40, and the fair value option-pricing model determines the total compensation expense to be $328,000. All of the options were exercised during the year 2020: 4,750 on January 3 when the market price was $67, and 14,250 on May 1 when the market price was $77 a share. Prepare journal entries relating to the stock option plan for the years 2018, 2019, and 2020. Assume that the employee performs services equally in 2018 and 2019. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and…arrow_forwardOn January 1, 2018, Hugh Morris Comedy Club (HMCC) granted 1 million stock options to key executivesexercisable for 1 million shares of the company’s common stock at $20 per share. The stock options are intendedas compensation for the next three years. The options are exercisable within a four-year period beginningJanuary 1, 2021, by the executives still in the employ of the company. No options were terminated during 2018.The market price of the common stock was $25 per share at the date of the grant. HMCC estimated the fair valueof the options at $9 each. 1% of the options are forfeited during 2019 due to executive turnover. What amountshould HMCC record as compensation expense for the year ended December 31, 2019, assuming HMCCchooses the option to record forfeitures as they actually occur?arrow_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