Market prices of the shares are shown below p46 per

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Market prices of the shares are shown below: December 31, 2011 P46 per share December 31, 2012 P51 per share The options were granted as compensation for executives services to be rendered over a two-year period beginning January 1, 2012. Total compensation expense shall be P100,000. What amount of compensation expense should Creative recognize as a result of this plan for the year ended December 31, 2012 under the fair value method? Solution: Total Compensation P100,000 / vesting period 2 Compensation expense P50,000 10. Constellation, Inc. had 60,000 shares of treasury share (P10 par value) at December 31, 2011, which it acquired at P11 per share. On June 1, 2011, Constellation issued 30,000 treasury shares to employees who exercised options under Constellation’s employee share option plan. The market value per share was P13 at December 31, 2011, P15 at June 1, 2012, and P18 at December 31, 2012. The share options had been granted for P12 per share. The cost method is used. What is the balance of the treasury share on Constellation’s statement of financial position sheet at December 31, 2012? Solution: Original cost (60,000 x P11) P600,000 Less: Cost of treasury shares issued (30,000 x 11) 330,000 Balance of treasury shares P330,000 11. On December 31, 2010, Revelation Company granted some of its executive’s options to purchase 15,000 shares of the company’s P50 par ordinary share at the option price of P60 per share. The total compensation expense would be P300,000 under the fair value method. The intrinsic value of the compensation which considered tax deductible is P400,000. The options become exercisable on January 2, 2012 and represent compensation for executives 2011 services. Income tax rate is 35% for all years.
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What is the impact on Revelation’s shareholder’s equity for the year ended December 31, 2011 as a result of this transaction? Solution: Deferred tax on intrinsic value (P400,000 x 35%) P140,000 Deferred tax on fair value (P300,000 x 35%) 105,000 Deferred tax direct to equity P 35,000 Deferred tax direct to profit or loss (closed to RE) P105,000 Deferred tax direct to equity 35,000 Total impact on shareholder’s equity on the recognition of share options P140,000 12. On January 1, 2010, ABC Company offered its chief executive officer share appreciation rights with the following terms: Predetermined price P100 per share Number of share 10,000 share Service period – 3 years 2010, 2011, 2012 Exercise date December 31, 2012 The share appreciation rights are exercised on December 31, 2012. The quoted price of the ABC share is as follows: P118 on December 31, 2010, P112 on December 31, 2011, and p124 on December 31, 2012. What amount should be recognized as compensation expense for 2012? Accrued compensation – December 31, 2010 (10,000 x 18 = 180,000 / 3 P60,000 Accrued compensation – December 31, 2011 (10,000 x 12 = 120,000/3 x 2) 80,000 Accrued compensation – December 31, 2010 (60,000) Compensation expense for 2011 20,000 Accrued compensation – December 31, 2012 (10,000 x 24) 240,000 Accrued compensation – December 31, 2011 (80,000 ) Compensation expense for 2012 160,000 13. On January 1, 2010, Alpha Company offered its top management share appreciation rights with the following terms: Predetermined price P100 per share
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Number of share 50,000 share Service period – 3 years Exercise date
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