TAILIEUCHUNG - Issues in Financial Accounting (18)

PART II: Corporate Accounting Concepts and . Issues Lecture 18. Review:. Review: Accounting. Accounting for. for Stock. Stock. Compensation. Accounting. Accounting for. for Stock. Stock Compensation. Compensation Illustration: On November 1, 2011, the shareholders of Chen. Company approve a plan that grants the company’s five. executives options to purchase 2,000 shares each of the. company’s $1 par value common stock. The company grants the. options on January 1, 2012. The executives may exercise the. options at any time within the next 10 years. The option price per. share is $60, and the market price of the shares at the date of. grant is $70 per share. Under the fair value method, the company. computes total compensation expense by applying an acceptable. fair value option-pricing model. The fair value option-pricing model. determines Chen’s total compensation expense to be $220,0003 Accounting. Accounting for. for Stock. Stock Compensation. Compensation Illustration: Assume that the expected period of benefit is two. years, starting with the grant date. Chen would record the. transactions related to this option contract as follows Dec. 31, 2012 Compensation Expense 110,000 *. Paid-in capital – Stock Options 110,000 Dec. 31, 2013 Compensation Expense 110,000. Paid-in capital - Stock Options 110,000 * ($220,000 ÷ 2).4 Accounting. Accounting for. for Stock. Stock Compensation. Compensation Exercise. If Chen’s executives exercise 2,000 of the 10,000. options (20 percent of the options) on June 1, 2015 (three years. and five months after date of grant), the company records the. following journal entry. June 1, 2015 Cash (2,000 x $60) 120,000. Paid-in Capital - Stock Options 44,000. Common Stock (2,000 x $1) 2,000. Paid-in Capital in Excess of Par 162,0005 Accounting. Accounting for. for Stock. Stock Compensation. Compensation Expiration. If Chen’s executives fail to exercise the remaining. stock options before their expiration date, the company records. the following at the date of expiration. Jan. 1, 2022 Paid-in Capital - Stock Options 176,000 *. Paid-in Capital – Expired Stock Options 176,000. * ($220,000 x 80%).6 PART II: Corporate Accounting Concepts and . Issues Lecture 18. Learning. Learning Objectives. Objectives 1. Identify the three categories of debt securities and describe the accounting. and reporting treatment for each category 2. Understand the procedures for discount and premium amortization on bond. investments 3. Identify the categories of equity securities and describe the accounting and. reporting treatment for each category 4. Explain the equity method of accounting and compare it to the fair value. method for equity securities8 Investments. Investments. Investments in Investments in. Debt S

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