1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Semenov [28]
3 years ago
10

On January 1, 2019, Pepin Company adopts a compensatory share option plan for its 50 executives. The plan allows each executive

to purchase 200 shares of its $2 par common stock for $30 per share after completing a 3-year service period. Pepin estimates the value of each option to be $14 on the grant date, and the company expects that 15% of the options will be forfeited and uses this rate in its compensation cost calculations in 2019. At the end of 2021, Pepin determined that the actual turnover was 7 executives for the entire service period. On January 6, 2022, 8 executives exercise their options.Required:1. Prepare a schedule of Pepin’s compensation computations for its compensatory share option plan for 2019 through 2021.2. Prepare Pepin’s journal entries for 2019 through 2022 in regard to this plan.
Business
1 answer:
bazaltina [42]3 years ago
6 0

Answer:

On 31 December 2019: Debit Compensation expense for $39,667; and Credit Paid-in capital from share options for $39,667.

On 31 December 2020: Debit Compensation expense for $39,667; and Credit Paid-in capital from share options for $39,667.

On 31 December 2021: Debit Compensation expense for $41,067; and Credit Paid-in capital from share options for $41,067.

On 06 January 2022: Debit Cash for $48,000; Debit Paid-in capital from share options for $22,400; Credit Common stock for $3,200; and Credit Paid in capital in excess of par- common stock (balancing figure) for $67,200.

Explanation:

Note: See part b of the the attached excel file for the journal entries

Also note that before the journal entries are recorded, the current compensation expense for year 2019, 2020 and 2021 are first calculated. See part a of the attached excel file for the calculation of the the current compensation expense for year 2019, 2020 and 2021.

In part a of the attached excel file, the estimated compensation cost for 2019, 2020 and 2021 are calculated as follows:

Estimated compensation cost for 2019 = Option value on the grant date * Number of executives * (1 - Expected option forfeited rate) * Number of shares in the option = $14 * 50 * (1 - 15%) * 200 = $119,000

Estimated compensation cost for 2020 = Option value on the grant date * Number of executives * (1 - Expected option forfeited rate) * Number of shares in the option = $14 * 50 * (1 - 15%) * 200 = $119,000

Estimated compensation cost for 2021 = Option value on the grant date * (Number of executives - Actual executives turnover for the entire service period) * Number of shares in the option = $14 * (50 - 7) * 200 = $120,400

On 06 January 2022, the calculation of the entries used in the part b of the attached excel file are as follows:

w.1. Cash = Number of executives who exercise their options * Number of shares in the option * Purchase price per share after completing a 3-year service period = (8 * 200 * $30) = $48,000  

w.2. Paid-in capital from share options = Number of executives who exercise their options * Number of shares in the option * Option value on the grant date = (8 * 200 * 14) = $22,400

w.3. Common Stock = Number of executives who exercise their options * Number of shares in the option * Sahre par value = (8 * 200 * $2) = $3,200

w.4. Paid in capital in excess of par- common stock (balancing figure)  = Cash + Paid-in capital from share options - Common Stock = $48,000 + $22,400 - $3,200 = $67,200

Download xlsx
You might be interested in
Yakov orders 40 cases of mescal from a Mexican distributor at a price of $90 per case. 2. A U.S. company sells 200 spark plugs t
vlabodo [156]

Answer:

Please see attachment

Explanation:

Please see attachment

8 0
3 years ago
Insurance Reading Quiz
Nezavi [6.7K]

The statement " whether employer-sponsored or privately purchased, disability insurance plans will cover 70% of your lost income" is: b) False.

<h3>What is disability insurance plans?</h3>

Disability insurance plans can be defined as an insurance plan that  help to cover the cost of people that are physically disabled.

When a person is disable due to work hazard the employers may tend to provide  short-term or long term disability insurance plans that will help to provide income to disable person.

Therefore the statement " whether employer-sponsored or privately purchased, disability insurance plans will cover 70% of your lost income" is: b) False.

Learn more about Disability insurance plans here: brainly.com/question/16810465

#SPJ1

6 0
2 years ago
After a sluggish quarter, the Federal Reserve Bank decides to increase the money supply in the economy. When the money-creation
Maslowich

Answer:

20; $1 billion

Explanation:

Given that,

New funds = $20 billion

Required reserve ratio = 5%

Money multiplier:

= 1/Required reserve ratio

= 1/0.05

= 20

Initial money increase by:

= Funds wants to be in the money supply × Required reserve ratio

= $20 billion × 5%

= $1 billion

Therefore, the Fed should initially increase $1 billion in the money supply.

5 0
3 years ago
In the ____ and ____ stages of product life cycle, firms often set priorities on growth and/or market share
klasskru [66]

Answer:

In the introduction and early growth stages of the product life cycle, firms often set priorities on growth and/or market share

Explanation:

3 0
3 years ago
Venzuela Company’s net income for 2020 is $50,000. The only potentially dilutive securities outstanding were 1,000 options issue
jarptica [38.1K]

Answer:

Answer explained below

Explanation:

GIVEN:

options issued = 1000

exercise per share = $6

market price = $20

net income = $50000

a) Diluted earnings per share

= (Total income - preference dividends) /( outstanding shares + diluted shares)

Amount paid towards shares = Options issued * Exercise price per share = 1,000 * 6 = $ 6,000

Value of options = Amount paid towards shares / Current market price = $ 6,000 /$ 20 = 300

Diluted shares = Options issued - value of options = 1000 - 300 = 700

So Diluted Earnings per share = ( 50,000) / ( 10,000 +700) = $ 4.67 per share.

b) Calculation of diluted shares 700 (same as above )

Weighted average for the period holding i.e, 3 months = 700 *3/12 = 175 shares increased during the period.

Diluted EPS = 50,000 /(10,000 +175) = $ 4.91 per share

5 0
3 years ago
Other questions:
  • The decision situations wherein the decision-maker chooses to consider several possible outcomes and the probabilities of their
    12·1 answer
  • Which of the following is a service supplying vehicle title records and damage reports?
    14·2 answers
  • Mack reynolds, the manager of the special products division, must decide whether to bid or not, and if intermodular semiconducto
    13·1 answer
  • Paul sells one parcel of land (basis of $100,000) for its fair market value of $160,000 to a partnership in which he owns a 60%
    11·1 answer
  • A. At the garage, mechanics changed the
    14·1 answer
  • Because financial markets are ____, securities buyers and sellers do not have full access to information and cannot always break
    12·2 answers
  • Misterio Company uses a standard costing system. During the past quarter, the following variances were computed:
    7·1 answer
  • What Is NOT one of the three primary resources that farnilies have to reach financlal goals?
    12·2 answers
  • What do most companies do when they look to provide an offering to global markets?
    14·1 answer
  • An experience that would be listed in the ""other experience"" category would include _____. a. military service b. awards earne
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!