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ACCO 340 Lecture Notes - Lecture 3: Fair Market Value, Market Price

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bronzemammoth297
25 Jan 2017
School
Concordia University
Department
Accountancy
Course
ACCO 340
Professor
Elizabeth Peltier- Wagner

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Document Summary

Stocks goes up when you work harder incentive to make more profit. Market price of stock is lower than employees price of stock. Because of employment, stock option benefit is issued, becoming a taxable benefit. Issue date is the date the company gives you the certificate 2013. Option price is the value of the share given by employer: 1,000 shares at 20$ Exercise date is the date i buy a share 2014. Exercise price (acb) is fair market value at exercise date: shares are 25$ # of shares * (exercise price option price: 1,000 * (25$ - 20$) = 5,000$ (taxable) Disposition date is the date i sell a share 2015. Sale price is the date i sell the share 2015. # of shares * (selling price cost: 1,000 * (30$ - 20$) = 10,000$ (taxable at 50%) Professional membership fees or union dues are deductible for everyone (ee and er) Salesmen expenses deductions cannot exceed commission income.

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Related Questions

During all 2015, Abel inc had 831,000 shares of common stock and 45,000 shares of $80 par value, 7%, noncumulative, nonconvertible preferred stock issued and outstanding. Abel paid cash dividends of $550,000 to common shareholders, and also cash dividends of ??? to preferred shareholders, on dec 15, 2015.

Abel’s net income for the year ended dec 31, 2015, was $2,850,000. The income tax rate is 40%.

As part of an incentive compensation plan, Abel granted 22,000 incentive stock options to division managers at dec 31, 2013. Each option permits its holder to buy one share of common stock at an exercise price of $36 per share which can be exercise one year from that date. The market price of the common stock average $40 per share during 2015.

On july 12, 2013, Abel issued $800,000 of convertible 10%bonds at face value. Each $1,000 bond is convertible into 40 common shares.

A.Compute Abel’s basic earnings per share for the year ended dec 31, 2015.

B.Compute Abel’s fully diluted earnings per share for the year ended dec 31, 2015.

During all 2015, Abel inc had 831,000 shares of common stock and 45,000 shares of $80 par value, 7%, noncumulative, nonconvertible preferred stock issued and outstanding. Abel paid cash dividends of $550,000 to common shareholders, and also cash dividends of ??? to preferred shareholders, on dec 15, 2015.

Abel’s net income for the year ended dec 31, 2015, was $2,850,000. The income tax rate is 40%.

As part of an incentive compensation plan, Abel granted 22,000 incentive stock options to division managers at dec 31, 2013. Each option permits its holder to buy one share of common stock at an exercise price of $36 per share which can be exercise one year from that date. The market price of the common stock average $40 per share during 2015.

On july 12, 2013, Abel issued $800,000 of convertible 10%bonds at face value. Each $1,000 bond is convertible into 40 common shares.

A.Compute Abel’s basic earnings per share for the year ended dec 31, 2015.

B.Compute Abel’s fully diluted earnings per share for the year ended dec 31, 2015.

On December 31, 2015, Dow Steel Corporation had 700,000 shares of common stock and 40,000 shares of 10%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends of $500,000 and $79,000 to common and preferred shareholders, respectively, on December 15, 2016. On February 28, 2016, Dow sold 64,000 common shares. Also, as a part of a 2015 agreement for the acquisition of Merrill Cable Company, another 31,000 shares (already adjusted for the stock dividend) are to be issued to former Merrill shareholders on December 31, 2017, if Merrill's 2017 net income is at least $600,000. In 2016, Merrill's net income was $730,000. In keeping with its long-term share repurchase plan, 6,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2016, was $2,600,000. The income tax rate is 40%. As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows: Date Granted Options Granted Share Price (adjusted for the stock dividend) December 31, 2014 17,000 $ 26 December 31, 2015 12,000 $ 35 December 31, 2016 15,500 $ 34 The market price of the common stock averaged $34 per share during 2016. On July 12, 2014, Dow issued $800,000 of convertible 10% bonds at face value. Each $1,000 bond is convertible into 40 common shares (adjusted for the stock dividend).

Compute Dow's basic and diluted earnings per share for the year ended December 31, 2016