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 plans. Show all posts
Showing posts with label plans. 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
Tuesday, September 15, 2015
Three different plans for financing a $10,000,000 corporation are under consideration by its organizers
PR14-1A Three different plans for financing a $10,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income
10%bonds= Plan1= blank, Plan2=blank, Plan3=$5,000,000
Preferred 10% stock,$40par Plan1=blank Plan2=$5,000,000 Plane3=2,500,000
Common stock,$10par= Plan1=$10,000,000 Plan2=5,000,000 Plan3=2,500,000
Total=Plan1=10,000,000 Plan2=10,000,000 Plan3=10,000,000
Required:
1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $2,000,000.
2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is 950,000.
3. Discuss advantages and disadvantages of each plan.
Click here for the solution: Three different plans for financing a $10,000,000 corporation are under consideration by its organizers
10%bonds= Plan1= blank, Plan2=blank, Plan3=$5,000,000
Preferred 10% stock,$40par Plan1=blank Plan2=$5,000,000 Plane3=2,500,000
Common stock,$10par= Plan1=$10,000,000 Plan2=5,000,000 Plan3=2,500,000
Total=Plan1=10,000,000 Plan2=10,000,000 Plan3=10,000,000
Required:
1. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is $2,000,000.
2. Determine for each plan the earnings per share of common stock, assuming that the income before bond interest and income tax is 950,000.
3. Discuss advantages and disadvantages of each plan.
Click here for the solution: Three different plans for financing a $10,000,000 corporation are under consideration by its organizers
Tuesday, July 7, 2015
Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program
PROBLEM 8-1. Determining the Profit-Maximizing Price [LO 1] Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program. The cable program's fee for selling the item is 20% of revenue. For this fee, the program will sell the calendar over six 10-minute segments in September.
Spencer's fixed costs of producing the calendar are $150,000 per production run. The company plans to wait for all orders to come in, then it will produce exactly the number of units ordered. Production time will be less than three weeks. Variable production costs are $25.00 per unit. In addition, it will cost approximately $5.00 per unit to ship the calendars to customers.
Marsha Andersen, a product manager at Spencer, is charged with recommending a price for the item. Based on her experience with similar items, focus group responses, and survey information, she has estimated the number of units that can be sold at various prices:
Price: Quantity:
$79.99 15,000
$69.99 20,000
$59.99 30,000
$49.99 45,000
$39.99 65,000
Required:
a) Calculate expected profit for each price.
b) Which price maximizes company profit.
Click here for the solution: Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program
Spencer's fixed costs of producing the calendar are $150,000 per production run. The company plans to wait for all orders to come in, then it will produce exactly the number of units ordered. Production time will be less than three weeks. Variable production costs are $25.00 per unit. In addition, it will cost approximately $5.00 per unit to ship the calendars to customers.
Marsha Andersen, a product manager at Spencer, is charged with recommending a price for the item. Based on her experience with similar items, focus group responses, and survey information, she has estimated the number of units that can be sold at various prices:
Price: Quantity:
$79.99 15,000
$69.99 20,000
$59.99 30,000
$49.99 45,000
$39.99 65,000
Required:
a) Calculate expected profit for each price.
b) Which price maximizes company profit.
Click here for the solution: Spencer Electronics has just developed a low-end electronic calendar that it plans to sell via a cable channel marketing program
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