Whether the auditor should sign off on the financial statements to report correctness of employee stock option as reported in the current period and the reason for it. Given information: Number of shares acquired as common stock is 100,000. Exercise price is $25. Vesting period is 4 years. Estimated fair value of the options is $20 per share. Expected forfeiture rate is 12%. EPS excluding stock option is $2.75 per share. Outstanding number of shares is 750,000.

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Answer 1

Question

Chapter 19, Problem 1JC

To determine

Whether the auditor should sign off on the financial statements to report correctness of employee stock option as reported in the current period and the reason for it.

Given information:

Number of shares acquired as common stock is 100,000.

Exercise price is $25.

Vesting period is 4 years.

Estimated fair value of the options is $20 per share.

Expected forfeiture rate is 12%.

EPS excluding stock option is $2.75 per share.

Outstanding number of shares is 750,000.

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Answer 2

Question

Chapter 19, Problem 1JC

To determine

Whether the auditor should sign off on the financial statements to report correctness of employee stock option as reported in the current period and the reason for it.

Given information:

Number of shares acquired as common stock is 100,000.

Exercise price is $25.

Vesting period is 4 years.

Estimated fair value of the options is $20 per share.

Expected forfeiture rate is 12%.

EPS excluding stock option is $2.75 per share.

Outstanding number of shares is 750,000.

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Answer 3

Question

Chapter 19, Problem 1JC

To determine

Whether the auditor should sign off on the financial statements to report correctness of employee stock option as reported in the current period and the reason for it.

Given information:

Number of shares acquired as common stock is 100,000.

Exercise price is $25.

Vesting period is 4 years.

Estimated fair value of the options is $20 per share.

Expected forfeiture rate is 12%.

EPS excluding stock option is $2.75 per share.

Outstanding number of shares is 750,000.

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Answer 4

Question

Chapter 19, Problem 1JC

To determine

Whether the auditor should sign off on the financial statements to report correctness of employee stock option as reported in the current period and the reason for it.

Given information:

Number of shares acquired as common stock is 100,000.

Exercise price is $25.

Vesting period is 4 years.

Estimated fair value of the options is $20 per share.

Expected forfeiture rate is 12%.

EPS excluding stock option is $2.75 per share.

Outstanding number of shares is 750,000.

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Answer 5

Chapter 19, Problem 1JC

To determine

Whether the auditor should sign off on the financial statements to report correctness of employee stock option as reported in the current period and the reason for it.

Given information:

Number of shares acquired as common stock is 100,000.

Exercise price is $25.

Vesting period is 4 years.

Estimated fair value of the options is $20 per share.

Expected forfeiture rate is 12%.

EPS excluding stock option is $2.75 per share.

Outstanding number of shares is 750,000.

Answer 6

Chapter 19, Problem 1JC

To determine

Whether the auditor should sign off on the financial statements to report correctness of employee stock option as reported in the current period and the reason for it.

Given information:

Number of shares acquired as common stock is 100,000.

Exercise price is $25.

Vesting period is 4 years.

Estimated fair value of the options is $20 per share.

Expected forfeiture rate is 12%.

EPS excluding stock option is $2.75 per share.

Outstanding number of shares is 750,000.

Answer 7

Chapter 19, Problem 1JC

To determine

Whether the auditor should sign off on the financial statements to report correctness of employee stock option as reported in the current period and the reason for it.

Given information:

Number of shares acquired as common stock is 100,000.

Exercise price is $25.

Vesting period is 4 years.

Estimated fair value of the options is $20 per share.

Expected forfeiture rate is 12%.

EPS excluding stock option is $2.75 per share.

Outstanding number of shares is 750,000.

Answer 8

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Answer 9

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Answer 10

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Answer 11

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. 19.5Q Ch. 19 - Prob. 19.6Q Ch. 19 - Prob. 19.7Q Ch. 19 - Prob. 19.8Q Ch. 19 - Prob. 19.9Q Ch. 19 - Prob. 19.10Q

Solution Summary: The author explains that the auditor should discuss the employee stock option with the management of the company and consider the 12% forfeiture rate.

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Chapter 19 Solutions