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Student Notes, Stock based compensation(19)

Graded vesting if vesting occurs over a period of

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Graded Vesting: If vesting occurs over a period of time (as opposed to “cliff”), then each separate  award (tranche) can be viewed as a separate award and allocated as such.  This  means you’ll use different values per tranche.   Performance based: Similar to exercising likelihood, impound the probability of achieving the  performance measures into the fair value of the options.   Options Options Options Options
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Chapter 19-9 Restricted Stock Similar to stock options No expense is recognized on grant date Recognize unearned compensation and common stock (APIC) Unearned compensation is expensed through straight-line Any forfeiture results in a complete reversal (compensation expense  can be a credit balance) Stock Compensation Plans–Restricted Stock Compensation Plans–Restricted Stock Stock Stock Compensation Plans–Restricted Stock Compensation Plans–Restricted Stock Stock
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Chapter 19-10 Restricted Stock A company grants 5,000 shares of restricted stock to an executive.  The  shares have a par value of $1, and a fair market value of $4 on the grant  date.  The stock vests at the end of the 4 year period .  Record the  journal entries for the grant and the 1 st  year service period.   Also, assume that on the 1 st  day of the 3 rd  year the stock is  forfeited.   Restricted Stock Restricted Stock Restricted Stock Restricted Stock
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Chapter 19-11 Solution Restricted Stock Restricted Stock Restricted Stock Restricted Stock
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Chapter 19-12 Employee Stock Purchase Plans Generally permit all employees to purchase stock at a discounted price for  a short period of time. Compensatory unless it satisfies three conditions: 1. Substantially all full-time employees participate on an equitable  basis.  2. The discount from market is small (<5%) 3. The plan offers no substantive option feature. Stock Compensation Plans Stock Compensation Plans Stock Compensation Plans Stock Compensation Plans
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Chapter 19-13 Earnings per share is one of the most important disclosures for  companies.  When earnings are reported, it is usually in the form of  EPS.  (See §260)   Earnings Per Share Earnings Per Share Earnings Per Share Earnings Per Share
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Chapter 19-14 Earnings Per Share Earnings Per Share Earnings Per Share Earnings Per Share Basic formula (you should have seen this already): Preferred dividends are subtracted on cumulative preferred stock,  whether declared or not.  Why subtract preferred dividends anyway?  
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Chapter 19-15 Earnings Per Share Earnings Per Share Earnings Per Share Earnings Per Share Weighted-Average Number of Shares What if a company had 1 share outstanding from January 1 to  December 30, and then issued 99 more shares on December 30?  
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