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Over what period of time should compensation cost be allocated?

Short Answer

Expert verified

The period during which an employee is expected to offer support in return for stock-based compensation. It very well may be unequivocal, understood, or determined, contingent upon the conditions of the award.

Step by step solution

01

Identification of the period in which compensation cost to be allocated

Stock compensation is a technique utilized by organizations to reward their workers involving stock options as a way for the organization's staff and its leaders partaking in the benefits and development of the organization. It alludes to money related development given to a person in return for their administration. In work environment, remuneration is procured by representatives.

02

The determination of compensation cost in relation to the employees  

An employee who possesses an investment opportunity should know whether the stock is vested, and the stock would hold its full worth regardless of whether the representative quits working with the organization. A representative is granted the offer if they meet specific necessities like the complete return of the load of the organization comparative with a specific index.

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Most popular questions from this chapter

All of the following are key similarities between GAAP and IFRS with respect to accounting for dilutive securities and EPS except:

(a) the model for recognizing stock-based compensation.

(b) the calculation of basic and diluted EPS.

(c) the accounting for convertible debt.

(d) the accounting for modifications of share options, when the value increases.

Angela Corporation issues 2,000 convertible bonds at January 1, 2016. The bonds have a 3-year life, and are issued at par with a face value of \(1,000 per bond, giving total proceeds of \)2,000,000. Interest is payable annually at 6%. Each bond is convertible into 250 ordinary shares (par value of $1). When the bonds are issued, the market rate of interest for similar debt without the conversion option is 8%.

Instructions

(a) Compute the liability and equity component of the convertible bond on January 1, 2016.

(b) Prepare the journal entry to record the issuance of the convertible bond on January 1, 2016.

(c) Prepare the journal entry to record the repurchase of the convertible bond for cash at January 1, 2019, its maturity date.

Assume that Sarazan Company has a share-option plan for top management. Each share option represents the right to purchase a \(1 par value ordinary share in the future at a price equal to the fair value of the shares at the date of the grant. Sarazan has 5,000 share options outstanding, which were granted at the beginning of 2017. The following data relate to the option grant.

Exercise price for options \)40

Market price at grant date (January 1, 2017) \(40

Fair value of options at grant date (January 1, 2017) \)6

Service period 5 years

Instructions

(a) Prepare the journal entry(ies) for the first year of the share-option plan.

(b) Prepare the journal entry(ies) for the first year of the plan assuming that, rather than options, 700 shares of restricted shares were granted at the beginning of 2017.

(c) Now assume that the market price of Sarazan shares on the grant date was $45 per share. Repeat the requirements for (a) and (b).

(d) Sarazan would like to implement an employee share-purchase plan for rank-and-file employees, but it would like to avoid recording expense related to this plan. Explain how employee share-purchase plans are recorded?

What is meant by a dilutive security?

How is antidilution determined when multiple securities are involved?

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