Question

Cordero Corporation has an employee share-purchase plan which permits all full-time employees to purchase 10 ordinary shares on the third anniversary of their employment and an additional 15 shares on each subsequent anniversary date. The purchase price is set at the market price on the date purchased less a 10% discount. How is this discount accounted for by Cordero?

Short answer

The Cordero Corporation will charge the discount on stock since it is an expense for the company.

Step-by-step solution

Explanation on employees

The term “employee” is utilized to indicate the human assets of an association. Employees render their administrations to an association for the achievement of its objectives and get compensations, commissions, rewards, and different offers consequently.

Treatment of discount

The discount will be accounted as an expense over the company as the company is offering its full-time employees an ordinary share on the purchase price, which is set at a 10% discount.