ACC 322 Unit 4 Application Assignment and Guided.docx - On January 1 2016 Parker and Ryan Insurance Company granted 30,000 stock options to certain

ACC 322 Unit 4 Application Assignment and Guided.docx - On...

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On January 1, 2016, Parker and Ryan Insurance Company granted 30,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2018, and expire on January 1, 2022. Each option can be exercised to acquire one share of $1 par common stock for $12. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. The market price of the company’s stock was as follows: January 1, 2016 $14 December 31, 2016 15 What amount should Parker and Ryan recognize as compensation expense for 2016? Multiple Choice $10,000 $20,000 $30,000 $50,000 Explanation Total compensation ($5 x 30,000)= $150,000 Vesting period (3 years) ÷ 3 Annual expense $50,000 At January 1, 2016, Naylor-Shaun Company had issued 40,000 executive stock options permitting executives to buy 40,000 shares of stock for $30. The vesting schedule is 20% the first year, 30% the second year, and 50% the third year (graded-vesting). The fair value of the options is estimated as follows: Vesting Amount Fair Value Date Vesting per Option
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Dec. 31, 2016 20% $ 7 Dec. 31, 2017 30% $ 8 Dec. 31, 2018 50% $12 Assuming Naylor-Shaun prepares its financial statements in accordance with International Financial Reporting Standards, what is the compensation expense related to the options to be recorded in 2017? Multiple Choice $48,000 $96,000 $128,000 Correct $130,667 Explanation 2016 2017 2018 Total Dec. 31, 2016 $ 56 $ 56 (40,000 x 20% x $7) Dec. 31, 2017 48 $ 48 96 (40,000 x 30% x $8) Dec. 31, 2018 80 80 $80 240 (40,000 x 50% x $12) $184 $128 $80 = $392
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Application Assignment Penne Pharmaceuticals sold 12 million shares of its $5 par common stock to provide funds for research and development. If the issue price is $16 per share, what is the journal entry to record the sale of the shares? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Explanation Cash (12 million shares × $16 per share) = $192 million Common stock (12 million shares × $5 par per share) = $60 million Horton Industries’ shareholders’ equity included 190 million shares of $1 par common stock and a balance in paid-in capital—excess of par of $1,710 million.
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