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    Exercise in Ac6 Online

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    Paul Garcia
    The document describes two problems involving share options and share appreciation rights granted to employees. For Problem 1, the entity granted 30,000 share options to an executive in Year 1 that would vest after 3 years if the share price reached P30. The estimated fair value was P5 per option. In Years 1-3, the share price increased but did not reach the target, so the options were forfeited with no compensation expense for Year 3. For Problem 2, COVID Company granted share appreciation rights to 600 employees in 2015 that would vest in 2018. Only 75% vested. The rights were to be paid out based on share price changes between grant and payout dates. The document asks for calculations of

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    Exercise in Ac6 Online

    Uploaded by

    Paul Garcia
    64 views2 pages
    The document describes two problems involving share options and share appreciation rights granted to employees. For Problem 1, the entity granted 30,000 share options to an executive in Year 1 that would vest after 3 years if the share price reached P30. The estimated fair value was P5 per option. In Years 1-3, the share price increased but did not reach the target, so the options were forfeited with no compensation expense for Year 3. For Problem 2, COVID Company granted share appreciation rights to 600 employees in 2015 that would vest in 2018. Only 75% vested. The rights were to be paid out based on share price changes between grant and payout dates. The document asks for calculations of

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    The document describes two problems involving share options and share appreciation rights granted to employees. For Problem 1, the entity granted 30,000 share options to an executive in Year 1 that would vest after 3 years if the share price reached P30. The estimated fair value was P5 per option. In Years 1-3, the share price increased but did not reach the target, so the options were forfeited with no compensation expense for Year 3. For Problem 2, COVID Company granted share appreciation rights to 600 employees in 2015 that would vest in 2018. Only 75% vested. The rights were to be paid out based on share price changes between grant and payout dates. The document asks for calculations of

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    64 views2 pages

    Exercise in Ac6 Online

    Uploaded by

    Paul Garcia
    The document describes two problems involving share options and share appreciation rights granted to employees. For Problem 1, the entity granted 30,000 share options to an executive in Year 1 that would vest after 3 years if the share price reached P30. The estimated fair value was P5 per option. In Years 1-3, the share price increased but did not reach the target, so the options were forfeited with no compensation expense for Year 3. For Problem 2, COVID Company granted share appreciation rights to 600 employees in 2015 that would vest in 2018. Only 75% vested. The rights were to be paid out based on share price changes between grant and payout dates. The document asks for calculations of

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    EXERCISE IN AC6 Deadline: March 26, 2020

    Name: Year and Block:

    PROBLEM NO.1

    At the beginning of year 1, an entity grants to a senior executive 30,000 share options. The
    grant is conditional upon the executive remaining in the entity’s employ until the end of year 3.

    The share options can be exercised if the entity’s share price increases from P20 at the
    beginning of year 1 to above P30 at the end of year 3. If the share price is above P30 at the
    end of year 3, the share options can be exercised at any time during the next five years, i.e., by
    the end of year 8.

    The entity estimates the fair value of the share options on grant date to be P5 per option. This
    estimate takes into account the following market condition:

    The possibility that the share price will exceed P30 at the end of year 3, i.e., the share
    options become exercisable; and

    The possibility that the share price will not exceed P30 at the end of year 3, i.e., the share
    options will be forfeited.

    The following actual events occurred in years 1 to 3:


    Year 1

    The share price has increased to P24.

    The entity’s estimate of the fair value of the options is P4 at the end of year 1. This takes
    into account whether the market condition will be satisfied by the end of year 3.

    Year 2

    The share price has decreased to P22. However, the entity remains optimistic that the
    share price target will be met by the end of year 3.

    The estimated fair value of the share options is P3. Again, this estimate takes into account
    the market condition noted above.

    Year 3

    The share price only reaches P28 by the end of year 3.

    The estimated fair value of the share options is zero, as the market condition has not been
    satisfied.

    A. Compensation expense for year 1


    B. Compensation expense for year 2
    C. Compensation expense for year 3
    D. Share options outstanding at the end of year 2
    E. Cumulative compensation expense for the three-year period

    PROBLEM NO.2

    COVID COMPANY granted 150 share appreciation rights to each of the 600 employees on
    January 1, 2015.

    The rights are due to vest on December 31, 2018 with payment being made on December 31,
    2019. Only 75% of the awards vest.

    Share Price
    January 1, 2015 P160
    December 31, 2015 190
    December 31, 2018 220
    December 31, 2019 200

    A. What is the accrued compensation on December 31, 2018?


    B. What is the accrued compensation on December 31, 2019?
    C. What is the gain on reversal of share appreciation rights to be recognized on December
    31, 2019?

    NOTE: You don’t have to print this. Just write your answer on a separate word (soft copy only).
    You may use your phone to do this exercise.

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