I2, Chapter 16-Exercise 13-solution

I2, Chapter 16-Exercise 13-solution - vesting period...

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CHAPTER 16, EXERCISE 16-13 1-1-10: Unearned Compensation ------------------------------------- 120,000 Common Stock (4,000 x 5)------------------------------ 20,000 Paid-in Capital on Common Stock (4,000 x 25)----- 100,000 12-31-10: Compensation Expense (120,000/4)------------------------ 30,000 Unearned Compensation Expense--------------------- 30,000 12-31-11: Compensation Expense (120,000/4)------------------------- 30,000 Unearned Compensation Expense---------------------- 30,000 3-4-12: Common Stock------------------------------------------------- 20,000 Paid-in Capital in Excess of Par on Common Stock----- 100,000 Unearned Compensation Expense--------------------- 60,000 Compensation Expense--------------------------------- 60,000 Note: According to the textbook, if the stock grant vests, a total of $120,000 would be charged to compensation expense over the 4 years regardless of the value of the stock at the end of the
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Unformatted text preview: vesting period. However, since the employee does not have control of the stock until the vesting date, your instructor thinks that any change in value between the grant date and the vesting date should be an adjustment to compensation expense. For example, if the stock fair value on the vesting date is $140,000, compensation expense would be debited for an additional $20,000 dollars. What about dividends received by the employee prior to vesting? Should not these dividends be charged to compensation expense? Should common stock be credited initially, or an account like Unvested Common Stock Grant? What do you think if the stock is granted on 1-1-10; however, the stock is not issued until the vesting date. How would you record the grant? What about dividends in the meantime?...
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