E 19-5 Stock options
American Optical Corporation provides a variety of share-based compensation plans to its employees. Under its executive stock option plan, the company granted options on January 1, 2011, that permit executives to acquire 4 million of the company's $1 par common shares within the next five years, but not before December 31, 2012 (the vesting date). The exercise price is the market price of the shares on the date of grant, $14 per share. The fair value of the 4 million options, estimated by an appropriate option pricing model, is $3 per option. No forfeitures are anticipated. Ignore taxes.
Required:
1. Determine the total compensation cost pertaining to the options.
2. Prepare the appropriate journal entry to record the award of options on January 1, 2011.
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2011.
4. Prepare the appropriate journal entry to record compensation expense on December 31, 2012.
Click here for the solution: American Optical Corporation provides a variety of share-based compensation plans to its employees
Showing posts with label compensation. Show all posts
Showing posts with label compensation. Show all posts
Tuesday, November 10, 2015
Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees
E 19-4 Restricted stock award plan; forfeitures anticipated
Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees. Under its restricted stock award plan, the company on January 1, 2011, granted 4 million of its $1 par common shares to various division managers. The shares are subject to forfeiture if employment is terminated within three years. The common shares have a market price of $22.50 per share on the grant date.
Required:
1. Determine the total compensation cost pertaining to the restricted shares.
2. Prepare the appropriate journal entry to record the award of restricted shares on January 1, 2011.
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2011.
4. Suppose Magnetic-Optical expected a 10% forfeiture rate on the restricted shares prior to vesting. Determine the total compensation cost.
Click here for the solution: Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees
Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees. Under its restricted stock award plan, the company on January 1, 2011, granted 4 million of its $1 par common shares to various division managers. The shares are subject to forfeiture if employment is terminated within three years. The common shares have a market price of $22.50 per share on the grant date.
Required:
1. Determine the total compensation cost pertaining to the restricted shares.
2. Prepare the appropriate journal entry to record the award of restricted shares on January 1, 2011.
3. Prepare the appropriate journal entry to record compensation expense on December 31, 2011.
4. Suppose Magnetic-Optical expected a 10% forfeiture rate on the restricted shares prior to vesting. Determine the total compensation cost.
Click here for the solution: Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees
Friday, August 21, 2015
The executive officers of Coach Corp have a performance-based compensation plan
CA16-2 (Ethical issues—compensation plan) The executive officers of Coach Corp have a performance-based compensation plan. The performance criteria of this plan is linked to growth in earnings per share. When annual EPS growth is 12%, the Coach executives earn 100% of the shares; ifgrowth is 16%, they earn 125%. If EPS growth is lower than 8%, the executives receive no additonal compensation.
In 2006, Joanna Becker, the controller of Coach, reviews year-end estimates of bad debt expense and warranty expense. She calculates the EPS growth at 15%. Peter Reiser, a member of the executive group, remarks over lunch one day that the estimate of bad debt expense might be decreased, increasing EPS growth to 16.1%. Becker is not sure she should do this because she believes that the current estimate of bad debts is sound. On the other hand, she recognizes that a great deal of subjectivity is involved in the computation.
Answer the following:
a) What, if any, is the ethical dilemma for Becker?
b) Should Becker's knowledge of the compensation plan be a factor that influences her estimate?
c) How should Becker respond to Reiser's request?
Click here for the solution: The executive officers of Coach Corp have a performance-based compensation plan
In 2006, Joanna Becker, the controller of Coach, reviews year-end estimates of bad debt expense and warranty expense. She calculates the EPS growth at 15%. Peter Reiser, a member of the executive group, remarks over lunch one day that the estimate of bad debt expense might be decreased, increasing EPS growth to 16.1%. Becker is not sure she should do this because she believes that the current estimate of bad debts is sound. On the other hand, she recognizes that a great deal of subjectivity is involved in the computation.
Answer the following:
a) What, if any, is the ethical dilemma for Becker?
b) Should Becker's knowledge of the compensation plan be a factor that influences her estimate?
c) How should Becker respond to Reiser's request?
Click here for the solution: The executive officers of Coach Corp have a performance-based compensation plan
Tuesday, August 18, 2015
Sometimes compensation packages include bonuses designed to provide performance incentives to employees
P 13-5 Bonus compensation; algebra
Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense.
Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 10% of the division’s net income. Division income in 2011 before the bonus and income tax was $150,000. The tax rate is 30%.
Click here for the solution: Sometimes compensation packages include bonuses designed to provide performance incentives to employees
Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense.
Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 10% of the division’s net income. Division income in 2011 before the bonus and income tax was $150,000. The tax rate is 30%.
Click here for the solution: Sometimes compensation packages include bonuses designed to provide performance incentives to employees
Monday, August 17, 2015
On April 1, 2012, Pavlova Company received a condemnation award of $410,000 cash as compensation for the forced sale of the company’s land and building
E10-25 (Disposition of Assets) On April 1, 2012, Pavlova Company received a condemnation award of $410,000 cash as compensation for the forced sale of the company’s land and building, which stood in the path of a new state highway. The land and building cost $60,000 and $280,000, respectively, when they were acquired. At April 1, 2012, the accumulated depreciation relating to the building amounted to $160,000. On August 1, 2012, Pavlova purchased a piece of replacement property for cash. The new land cost $90,000, and the new building cost $380,000.
Instructions
Prepare the journal entries to record the transactions on April 1 and August 1, 2012.
Click here for the solution: On April 1, 2012, Pavlova Company received a condemnation award of $410,000 cash as compensation for the forced sale of the company’s land and building
Instructions
Prepare the journal entries to record the transactions on April 1 and August 1, 2012.
Click here for the solution: On April 1, 2012, Pavlova Company received a condemnation award of $410,000 cash as compensation for the forced sale of the company’s land and building
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