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Exam 19: Share-Based Compensation and Earnings Per Share

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Question 21

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Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

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Question 22

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What is the "if converted method"?

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The "if converted method" is used to ass...

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Question 23

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Executive stock options should be reported as compensation expense:

The calculation of diluted earnings per share assumes that stock options were exercised and that the proceeds were used to buy treasury stock at:

Under its executive stock option plan,Q Corporation granted options on January 1,2016,that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years,but not before December 31,2018 (the vesting date) .The exercise price is the market price of the shares on the date of grant,$18 per share.The fair value of the options,estimated by an appropriate option pricing model,is $4 per option.No forfeitures were anticipated;however,unexpected turnover during 2017 caused the forfeiture of 5% of the stock options.Ignoring taxes,what is the effect on earnings in 2018?

Use the following to answer questions In its 2016 Annual Report to shareholders,V Co.had the following disclosure note about its EPS: NOTE 9 - EARNINGS PER SHARE: The following represents the reconciliation from basic earnings per share to diluted earnings per share.Options to purchase 8.3 million and 9.7 million shares of common stock were outstanding at May 31,2016 and May 31,2015,respectively,but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares and,therefore,the effect would be antidilutive.No such antidilutive options were outstanding at May 31,2014. -At the end of 2016,what is the maximum number of shares that could possibly be issued if all stock options and awards are exercised? Explain why V Co.used only 3.3 million in its computation for 2016.

Under IFRS,a deferred tax asset for stock options:

Earnings per share data is required to be reported:

When computing diluted earnings per share,which of the following will not be considered in the calculation?

If a company's capital structure includes convertible bonds,diluted EPS might be reduced even if the bonds are not actually converted during the year.

If a stock dividend were distributed,when calculating the current year's EPS,the shares distributed are treated as having been issued:

Cartel Products Inc.offers a restricted stock award plan to its vice presidents.On January 1,2016,the corporation granted 12 million of its $1 par common shares,subject to forfeiture if employment is terminated within two years.The common shares have a market value of $6 per share on the date the award is granted. Required: (1. )Assume that no shares are forfeited.Determine the total compensation cost pertaining to the restricted shares. (2. )Prepare the appropriate journal entries related to the restricted stock through December 31,2017.

When a company's income statement includes discontinued operations,the company should report per share information on:

What would be the total compensation indicated by these options?

On December 31,2015,Belair Corporation had 100,000 shares of common stock outstanding and 30,000 shares of 7%,$50 par,cumulative preferred stock outstanding.On February 28,2016,Belair purchased 24,000 shares of common stock on the open market as treasury stock paying $20 per share.On June 30,2016,Belair declared and issued a 2-for-1 stock split on outstanding common stock.Belair sold 6,000 treasury shares on September 30,2016,for $15 per share.Net income for 2016 was $180,905. Required: Compute Belair's basic earnings per share for 2016.

On January 1,2016,Black Inc.issued stock options for 200,000 shares to a division manager.The options have an estimated fair value of $6 each.To provide additional incentive for managerial achievement,the options are not exercisable unless divisional revenue increases by 6% in three years.Black initially estimates that it is probable the goal will be achieved.In 2017,after one year,Black estimates that it is not probable that divisional revenue will increase by 6% in three years.Ignoring taxes,what is the effect on earnings in 2017?

On January 1,2016,D Corp.granted an employee an option to purchase 6,000 shares of D's $5 par common stock at $20 per share.The options became exercisable on December 31,2017,after the employee completed two years of service.The option was exercised on January 10,2018.The market prices of D's stock were as follows: January 1,2016,$30;December 31,2017,$50;and January 10,2018,$45.An option pricing model estimated the value of the options at $8 each on the grant date.For 2016,D should recognize compensation expense of:

If previous experience indicates that a material number of stock options will be forfeited before they vest,the fair value estimate of the options on the grant date should be adjusted to reflect that expectation.

What is Falwell's basic earnings per share for 2016,rounded to the nearest cent?

What will Angel report as diluted earnings per share for 2016,rounded to the nearest cent?