Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition
1st Edition
ISBN: 9780134047430
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 19, Problem 19.2BE
To determine
The treatment of employee stock option by a company and journal entries at the date of grant.
Giveninformation:
Number of shares offered is 1,000 shares.
Fair value is $12.
Market price and exercise price both is $6.
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Assume that TPL has a stock-option plan for top management. Each stock option represents the right to purchase a share of TPL $1 par value common stock in the future at a price equal to the fair value of the stock at the date of the grant. TPL has 75,0 00 stock options outstanding, which were granted at the beginning of 2020. The following data relate to the option grant: Exercise price for options $31; Market price at grant date (January 1, 2020) $31; Fair value of options at grant date (January 1, 2020) $2; Service period 4 years.
Prepare the journal entry (ies) for the first year of the plan.
Prepare the journal entry (ies) for the first year of the plan assuming that, rather than options, 2,500 shares of restricted stock were granted at the beginning of 2020.
Now assume that the market price of TPL stock on the grant was $35 per share. Repeat the requirements for (a) and (b).
TPL eould like to implement an employee stock-purchase plan for rank-and-file employees,but it would like…
Assume that Amazon.com has a stock-option plan for top management. Each stock option represents the right to purchase a share of Amazon $1 par value common stock in the future at a price equal to the fair value of the stock at the date of the grant. Amazon has 5,000 stock options outstanding, which were granted at the beginning of 2020. The following data relate to the option grant.
Exercise price for options
1$40
Market price at grant date (January 1, 2020)
1$40
Fair value of options at grant date (January 1, 2020)
1$6
Service period
15 years
Instructions
a. Prepare the journal entry(ies) for the first year of the stock-option plan.
b. Prepare the journal entry(ies) for the first year of the plan assuming that, rather than options, 700 shares of restricted stock were granted at the beginning of 2020.
c. Now assume that the market price of Amazon stock on the grant date was $45 per share. Repeat the requirements for (a) and (b).
d. Amazon would like to…
Chapter 19 Solutions
Intermediate Accounting - Myaccountinglab - Pearson Etext Access Card Student Value Edition
Ch. 19 - What is the allocation period used to expense...Ch. 19 - How do companies account for stock-based...Ch. 19 - Do companies with equity-based compensation plans...Ch. 19 - When accounting for employee stock options, will a...Ch. 19 - Prob. 19.5QCh. 19 - Prob. 19.6QCh. 19 - Prob. 19.7QCh. 19 - Prob. 19.8QCh. 19 - Prob. 19.9QCh. 19 - Prob. 19.10Q
Ch. 19 - Prob. 19.1MCCh. 19 - Prob. 19.2MCCh. 19 - Prob. 19.3MCCh. 19 - Prob. 19.4MCCh. 19 - Prob. 19.5MCCh. 19 - Prob. 19.6MCCh. 19 - Prob. 19.7MCCh. 19 - Prob. 19.8MCCh. 19 - Prob. 19.1BECh. 19 - Prob. 19.2BECh. 19 - Prob. 19.3BECh. 19 - Prob. 19.4BECh. 19 - Prob. 19.5BECh. 19 - Prob. 19.6BECh. 19 - Employee Stock Options, Liability-Classified...Ch. 19 - Prob. 19.8BECh. 19 - Prob. 19.9BECh. 19 - Prob. 19.10BECh. 19 - Prob. 19.11BECh. 19 - Prob. 19.12BECh. 19 - Prob. 19.13BECh. 19 - Prob. 19.14BECh. 19 - Prob. 19.15BECh. 19 - Prob. 19.16BECh. 19 - Prob. 19.17BECh. 19 - Prob. 19.18BECh. 19 - Prob. 19.19BECh. 19 - Prob. 19.20BECh. 19 - Prob. 19.21BECh. 19 - Prob. 19.22BECh. 19 - Prob. 19.23BECh. 19 - Prob. 19.24BECh. 19 - Prob. 19.1ECh. 19 - Prob. 19.2ECh. 19 - Prob. 19.3ECh. 19 - Prob. 19.4ECh. 19 - Prob. 19.5ECh. 19 - Prob. 19.6ECh. 19 - Prob. 19.7ECh. 19 - Prob. 19.8ECh. 19 - Prob. 19.9ECh. 19 - Prob. 19.11ECh. 19 - Prob. 19.12ECh. 19 - Prob. 19.1PCh. 19 - Prob. 19.2PCh. 19 - Prob. 19.3PCh. 19 - Prob. 19.4PCh. 19 - Prob. 19.5PCh. 19 - Prob. 19.6PCh. 19 - Prob. 19.7PCh. 19 - Prob. 19.8PCh. 19 - Prob. 19.9PCh. 19 - Prob. 19.10PCh. 19 - Prob. 19.11PCh. 19 - Prob. 19.12PCh. 19 - Prob. 1JCCh. 19 - Prob. 1FSACCh. 19 - Prob. 2FSACCh. 19 - Prob. 1SSCCh. 19 - Prob. 2SSCCh. 19 - Prob. 3SSCCh. 19 - Prob. 4SSCCh. 19 - Basis for Conclusions Case 1: Are Employee Stock...Ch. 19 - Prob. 2BCC
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- Now assume that the market price of Amazon stock on the grant date was $47 per share. Prepare the journal entries for the first year of the plan assuming that, rather than options, 710 shares of restricted stock were granted at the beginning of 2020. (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 enter O for the amounts.) Date Account Titles and Explanation Debit Credit >arrow_forwardAccounting for Stock Options On April 1 of Year 1, Badger Corp. announced a stock option incentive plan for its top executives. The plan provides certain executives stock options for the company's common stock. Each option allows for the purchase of one share of common stock, par $1, at a standard option price of $25 per share. The rights are nontransferable and are exercisable three years after the grant date and prior to five years from the grant date. Continuing employment is required through the exercise date, and the requisite service period ends on the first possible exercise date. On April 1 of Year 1, 4,000 options were granted to employees when the market price was $30 per share. Using an option-pricing model, the fair value of the options granted was $36,000. Employees exercised 2,400 options on June 30 of Year 4, when the market price of the stock was $45 per share. . a. Compute the total amount of compensation cost for the grant made on April 1 of Year 1. $ 36,000 ✔ b.…arrow_forwardOn January 1, Year 1, Lasagna Corporation granted to an employee the right to choose either shares or cash payment. The choices are as follows: •Share alternative – equal to 25,000 shares with par value of P30 •Cash alternative – cash payment equal to the market value of 20,000 shares The grant is conditional upon the completion of three years of service. On grant date, on January 1, Year 1, the share price is P51. The share prices for the three-year vesting period are P54 on December 31, Year 1, P66 on December 31, Year 2 and P65 on December 31, Year 3. After taking into account the effect of vesting restrictions, the entity has estimated that the fair value of the share alternative is P48. What is the share premium if the employee has chosen the share alternative on December 31, Year 3? A. 750,000 B. 880,000 C. 550,000 D. 730,000arrow_forward
- On January 1, Year 1, Lasagna Corporation granted to an employee the right to choose either shares or cash payment. The choices are as follows: •Share alternative – equal to 25,000 shares with par value of P30 •Cash alternative – cash payment equal to the market value of 20,000 shares The grant is conditional upon the completion of three years of service. On grant date, on January 1, Year 1, the share price is P51. The share prices for the three-year vesting period are P54 on December 31, Year 1, P66 on December 31, Year 2 and P65 on December 31, Year 3. After taking into account the effect of vesting restrictions, the entity has estimated that the fair value of the share alternative is P48. What is the share premium if the employee has chosen the cash alternative on December 31, Year 3? A. 730,000 B. 0 C. 700,000 D. 180,000arrow_forwardOn January 1, Year 1, Lasagna Corporation granted to an employee the right to choose either shares or cash payment. The choices are as follows: •Share alternative – equal to 25,000 shares with par value of P30 •Cash alternative – cash payment equal to the market value of 20,000 shares The grant is conditional upon the completion of three years of service. On grant date, on January 1, Year 1, the share price is P51. The share prices for the three-year vesting period are P54 on December 31, Year 1, P66 on December 31, Year 2 and P65 on December 31, Year 3. After taking into account the effect of vesting restrictions, the entity has estimated that the fair value of the share alternative is P48. What is the compensation expense for Year 3? A. 480,000 B. 600,000 C. 580,000 D. 420,000arrow_forwardAssuming the executive chose the cash alternative, what would be the journal entryon Dec. 31, 2016arrow_forward
- Please show relevant solution and journal entries as well. The highlighted choice is the answer. Please explain how to get it. thanksarrow_forwardAssume that Amazon.com has a stock-option plan for top management. Each stock option represents the right to purchase a share of Amazon $1 par value common stock in the future at a price equal to the fair value of the stock at the date of the grant. Amazon has 5,600 stock options outstanding, which were granted at the beginning of 2017. The following data relate to the option grant. Exercise price for options $38 Market price at grant date (January 1, 2017) $38 Fair value of options at grant date (January 1, 2017) $6 5 Service period years A. Prepare the journal entries for the first year of the stock-option plan. (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 enter 0 for the amounts.) B. Prepare the journal entries for the first year of the plan assuming that, rather than options, 700 shares of restricted stock were granted at the beginning of 2017 C. Now assume…arrow_forwardRecording 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_forward
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