Computing EPS: Contingently Issuable SharesOn January 1, to motivate top management, Resume Inc. granted 800 options to purchase common stock at $10 per share to key officers if net income increasedby 5% over the prior year. The fair value of the options on January 1 is estimated to be $4,000. Resume Inc. reported net income of $40,000 for the year, whichrepresented a 7% increase over the prior year. How will the options affect the calculation of the company's diluted earnings per share?Increasethe denominatorMy0x sharesCheck

Answer:-Earnings per share:- A financial indicator called earnings per share shows how much of a…

Answered: Computing EPS: Contingently Issuable…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $89 per share. You have employee stock options to purchase 1,000 TWTR shares for $94 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 79 percent and that the interest rate is 2.2 percent. (Assume the options are European options that may only be exercised at the maturity date.) Is this option a call or a put? multiple
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Share-based Compenstation On January 1, 2015, WAY Inc. granted 100 share options to its 500 employees. The share options are subject to the condition that the employees must remain to the company for a period of 3 years. The share option is not traded at the stock market. Each share option entitles the holder to acquire one ordinary share with P2 par value for P5 per share. The ordinary shares of WAY Inc. which are listed at the stock market are trading at the following prices: 12/31/2015 – P8; 12/31/2016 – P7; 12/31/2017 – P10. As of December 31, 2015, 80 employees have left and the company estimated based on weighted average probability that 20 employees will leave during the vesting period. As of December 31, 2016, 40 employees have left and the company estimated based on weighted average probability that 30 employees will leave during the vesting period. As of December 31, 2017, 130 employees have left. On January 1, 2018, all share options are exercised. Required: 1.…
Shares Sold – Subscription Basis On January 1, 2020, Aylmer offered to sell some shares on a subscription basis. The offer was for fifty individuals to purchase 100 common shares each at $20 per share. 60% of the amount was paid on June 30,2020. That transaction was recorded properly in the accounting records of Aylmer. The remaining amount will be received on June 30, 2021. NOTE - There is not a spreadsheet in the Excel file. Review the trial balance. You should determine if an entry should be made or not and make the required entry(ies) as necessary in the Excel tab labelled “Journal Entries” Trial Balance Unadjusted Trial Balance At December 31, 2019 At December 31, 2020 Preferred Shares 500,000 500,000 Common Stock 1,000,000 1,500,000 Common Stock Subscribed 100,000 Retained Earnings 337,366 692,275
Assume that on January 1, year 1, ABC Incorporated issued 5,000 stock options with an estimated value of $10 per option. Each option entitles the owner to purchase one share of ABC stock for $25 a share (the per share price of ABC stock on January 1, year 1, when the options were granted). The options vest at the end of the day on December 31, year 2. All 5,000 stock options were exercised in year 3 when the ABC stock was valued at $31 per share. Identify ABC's year 1, 2, and 3 tax deductions and book-tax differences (indicate as favorable or unfavorable and as permanent or temporary) associated with the stock options under the following alternative scenarios: Required: a. The stock options are incentive stock options. b. The stock options are nonqualified stock options. Complete the following table. Note: For all requirements, leave no answer blank. Enter zero if applicable and select "Not Applicable" if no effect. Under ASC 718 a. Incentive Stock Options b. Nonqualified Stock Options…
Recording Shares Issued through an Employee Share Purchase Plan Rice Corporation has a stock purchase plan with the following provision. Each full-time employee with a minimum of one year’s service may acquire from Rice Corporation, its common stock, $10 par, through payroll deductions at 5% below the market price on the date selected by the employee for a stock purchase (the exercise date). The exercise decision must be made within one year from the payroll deduction date. Employee Adams signed a payroll deduction agreement form on January 1, 2020, for $48 per month. At that date, the market price of the stock was $27 per share. At the end of 2020, Adams requested that stock be purchased equal to the amount Adams accumulated as a deposit. At that date, the market price of the stock was $25 per share. Required Prepare the journal entry on December 31, 2020, for the issuance of shares to Adams. Hint: The company credited Liability—Employee Stock Purchase Plan at the time of each payroll…
PROBLEM 1: Mr. Queen Company is authorized to issue 80,000 ordinary shares. During the current year, the company issued 25,000 shares. REQUIRED: Prepare the required entry to record the issuance of the ordinary shares under each of the following assumptions: The shares are no-par but have a stated value of P10. The total issue price was P850,000. The shares are no-par and have no stated value. They were issued to a lawyer in exchange for services rendered in connection with the organization of the corporation. The lawyer would normally charge P70,000 for these services. There is no reasonable way to determine 1. 2. the fair market value of the stock.
The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $69 per share. You have employee stock options to purchase 1,000 TWTR shares for $74 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 59 percent and that the interest rate is 2.7 percent. (Assume the options are European options that may only be exercised at the maturity date.) a. Is this option a call or a put? Call ○ Put b. Using an option pricing calculator such as the one at erieri.com/blackscholes, estimate the value of your TWTR options. Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar. Value of your TWTR options c. What is the estimated value of the options if their maturity is six months instead of three years? Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar. Value of the options
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