Stock Options

Question 1

Stock Purchase Plan

Answer 1

• Noncompensatory: compensation expense equals amount paid by the employer
• Compensatory: amount paid by the employer plus discount

Question 2

Stock Option Plan

Answer 2

Compensatory: FV of option at grant date

Question 3

Stock Purchase Plan Noncompensatory J/E

Answer 3

Compensation Expense: paid by employer
Cash: paid by employee
———Common Stock: par
———APIC

Question 4

Stock Purchase Plan Compensatory J/E

Answer 4

Compensation Expense+Discount: paid by employer+dis
Cash: paid by employee
———Common Stock: par
———PAR

Question 5

Compensation Expense equal to

Answer 5

Is equal to FV of options on grant date

Question 6

Stock Awards - 1,000 shares of restricted $2 common stock were granted to managers when the market price was $18. Service vesting period is 8 years
What is compensation expense

Answer 6

End of Each Year
Compensation Expense 6,000(18,000/3)
—–APIC-Restricted Stock 6,000

Vested
APIC-Restricted Stock 18,000
—–Common Stock 2,000
—–Apic-Common 16,000

Question 7

Stock Award Forfeiture - Assume 200 of 1,000 shares were forfeited in 3rd year. Annual compensation expense is $6,000 or $6 per share (1,000)

Answer 7

APIC-Restriced 1,200(200*6)
—–Compensation Exp 1,200

Compensation Exp 4,800(800*6)
—–Apic-Restricted 4,800

Net Compensation expense is $3,600

Question 8

Compensation Expense for forfeiture

Answer 8

• Subtract forfeited shares from total shares then multiply by grant date FV
• Multiply forfeited shares by FV on grant date then divide by remaining years
• Subtract

Question 9

Compensation expense when given values at the beginning and end of the year over a few years

Answer 9

Compare the dates where the stock was issued

Question 10

Compensation when you are awarded after an example of 5 years of work for years 6,7,8

Answer 10

Compensation expense is recognized over the first 5 years