AFM362 Chapter Notes - Chapter 3: Employee Benefits, Employment Contract, Capital Asset

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OC2146671

11 Sep 2019

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM362

Professor

Ori Friedman

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Document Summary

Calculation of the standby charge benefit: employee has a company automobile made available for any kind of use. Standby charge and operating benefits only apply to automobiles. Should reflect what an arm"s length cost for substitute/similar transportation would be. Indefinite carryforward position as long as the employee can meet either test in the future year of deduction. Supplies related to a workspace in the home include expenses paid for the maintenance for the home. Individuals earning commission income can include property taxes, and insurance paid on a home: all expenses must be allocated between the workspace and the personal space of the home on a reasonable basis. Defining the taxation year: taxation year of an individual always ends december 31. Salary, wages and other remuneration including gratuities: remuneration includes all items received as a result of the individual"s employment, also includes amounts or benefits received indirectly, such as if the employer pays for the employee"s rent.

Related Questions

Sarasota Company adopted a stock-option plan on November 30, 2016, that provided that 67,700 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $9 a share. The market price was $12 a share on November 30, 2017.

On January 2, 2017, options to purchase 28,600 shares were granted to president Tom Winterâ14,900 for services to be rendered in 2017 and 13,700 for services to be rendered in 2018. Also on that date, options to purchase 14,600 shares were granted to vice president Michelle Bennettâ7,300 for services to be rendered in 2017 and 7,300 for services to be rendered in 2018. The market price of the stock was $14 a share on January 2, 2017. The options were exercisable for a period of one year following the year in which the services were rendered. The fair value of the options on the grant date was $4 per option.

In 2018, neither the president nor the vice president exercised their options because the market price of the stock was below the exercise price. The market price of the stock was $8 a share on December 31, 2018, when the options for 2017 services lapsed.

On December 31, 2019, both president Winter and vice president Bennett exercised their options for 13,700 and 7,300 shares, respectively, when the market price was $16 a share.

Prepare the necessary journal entries in 2016 when the stock-option plan was adopted, in 2017 when options were granted, in 2018 when options lapsed, and in 2019 when options were exercised.

copperllama79

On October 15, 2017, the board of directors of Ensor MaterialsCorporation approved a stock option plan for key executives. OnJanuary 1, 2018, 21 million stock options were granted, exercisablefor 21 million shares of Ensor's $1 par common stock. The optionsare exercisable between January 1, 2021, and December 31, 2023, at90% of the quoted market price on January 1, 2018, which was $10.The fair value of the 21 million options, estimated by anappropriate option pricing model, is $4 per option. Ensor choosesthe option to recognize forfeitures only when they occur.

Ten percent (2.1 million) of the options were forfeited when anexecutive resigned in 2019. All other options were exercised onJuly 12, 2022, when the stockâs price jumped unexpectedly to $20per share.

Required:
1. When is Ensorâs stock option measurementdate?
2. Determine the compensation expense for thestock option plan in 2018. (Ignore taxes.)
3. & 5. Prepare the necessary journalentries.:Record compensation expense on December 31, 2019.,Recordcompensation expense on December 31, 2020.,Record the exercise ofthe options in 2022.

bluehyena306

At the beginning of its first year of operations, the Barker Co.grants non qualified options on 5,000 of its $1 par common stock.The exercise price of each option is $30. The fair market value ofeach option on the grant date is $6 and the options vest after 4years. The fair market value of each common share on the grant dateis $29. The tax rate is 20% in all years. 1)How much is the balanceof the deferred tax asset at the end of the first year of thevesting period? 2)How much is the book value of common stock issuedif all the options are exercised when the fair market value of eachcommon share is $40 ? 3)Barker's pre-tax income is $300,000 in theperiod when the options are exercised. The fair market value ofeach share on the exercise date is $40. How much is taxable incomein that period?

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AFM362 Chapter Notes - Chapter 3: Employee Benefits, Employment Contract, Capital Asset

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