ACCTG 472 Chap 19 SB | Questions with 100% Correct Answers

ACCTG 472 Chap 19 SB | Questions with 100% Correct Answers Compensation plans that are tied to the achievement of certain targets and are used to motivate key employees are referred to as ___________ compensation plans management or performance Which of the following is correct regarding the nature of restricted stock? The shares can only be sold back to the issuing company and not outside investors. The shares typically are contingent on the continued employment of the awardee. The shares can only be traded during certain time periods. Falken Company awards 1,000 shares of common stock to Robert Small. The shares are restricted and require that Robert remains with the company for at least 2 more years. The current market price of the shares is $15 per share. Total compensation associated with this restricted stock award is $15k When restrictions are lifted on restricted stock units for par value stock, paid-in capital restricted stock is replaced by common stock paid-in capital - excess of par Which of the following statements regarding the prevalence of stock option awards is correct? Stock options are unique to large multinational companies. All large companies grant stock options. All public companies grant stock options. Many large and medium-size companies grant stock options. Which of the following represent typical goals of executive compensation plans? (Select all that apply.) To significantly reduce corporate tax obligations. To provide compensation to certain employees. To reduce reported net income. To create performance incentives for certain employees. Share-based plans that requires that the awardee continue to be employed by the granting company are typically referred to as restricted stock plans Total compensation associated with restricted stock awards typically is equal to the shares' market value at time of the removal of the restriction. par value. market price at grant date of the award. Stock options give employees the choice to purchase ________ during a specific time period. an unlimited number of shares of the firm's stock at a price determined by future conditions an unlimited number of shares of the firm's stock at a specified price a specified number of shares of the firm's stock at a specified price a specified number of shares of the firm's stock at a price determined by future conditions Marian Company granted restricted stock units for its par value stock to its top executives. When the restriction is lifted, Marian should (journal entry) debit paid-in capital—restricted stock. credit paid-in capital in excess of par. credit common stock. True or false: Stock options have become an integral part of most medium and large companies. True Donald Company grants stock options to certain employees. On the date of grant, Donald should measure total compensation based on par value of the stocks to be issued under the grant. the difference between the option exercise price and the current market price. the fair value of the options. Which of the following are common types of restricted stock plans? Restricted stock units Restricted stock awards On January 2, 20X1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. On the date of grant, the estimated value of the options is $6 per option. During 20X4, when the market value of the stock is $30 per share, 9,000 stock options were exercised. Utta Corp. should recognize this event by debiting (Select all that apply.) cash for $180,000. paid-in capital—stock options for $54,000. Which of the following are facts or conditions that are specifically set forth in stock option plans? (Select all that apply.) The minimum number of shares option holders must purchase The time period during which option holders may purchase shares The maximum number of shares option holders may purchase The price at which option holders may purchase shares Compensation relating to stock option grants should be ignored until the grants are exercised. recognized over the service period for which employees receive options. ignored permanently if the current market price of the stock does not exceed the exercise price. On January 2, 20X1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. The estimated value of the options is $6 per option. During 20X4, 9,000 stock options were exercised. In 20X5, the remaining stock options expire. Utta should recognize the expiration by debiting paid-in capital—stock options for $6,000. Falcon Company grants stock options to its upper and middle management employees. The options vest over a 4-year period, with 25% exercisable after 1 year, 25% after 2 years, another 25% after 3 years, and the remaining 25% after 4 years. This is an example of graded vesting - over time (cliff vesting is when they come exercisable all at once). On January 2, 20X1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. On the date of grant, the estimated value of the options is $6 per option. During 20X4, 9,000 stock options were exercised. Utta Corp. should recognize this event by crediting (Select all that apply.) common stock for $9,000. paid-in capital in excess of par for $225,000. ____________ ____________ plans give employees the choice to purchase a specified number of shares of the firm's stock at a specified price during a specified period of time. stock option Share-based plans typically are grouped into two major categories based on the conditions that must be met by employees in order to receive the benefits of the award. These categories are market-based plans. performance-based plans. Marian Company granted restricted stock units for its par value stock to its top executives. When the restriction is lifted, Marian should (Select all that apply.) (journal entry) credit paid-in capital in excess of par. debit paid-in capital—restricted stock. credit common stock. Employee share purchase plans typically allow ______ to purchase company shares at favorable terms. all employees On January 2, 20X1, Utta Corp. (a calendar-year company) grants 10,000 stock options with a 3-year vesting period to employees. On the grant date, the market price of the $1 par value stock is equal to the exercise price of $20 per share. The estimated value of the options is $6 per option. During 20X4, 9,000 stock options were exercised. In 20X5, the remaining stock options expire. When the options expire, Utta should credit paid-in capital—expired stock options for $6,000. Which of the following accounting numbers is reported most frequently by the media? earnings per share Which of the following will qualify a company for having a simple capital structure for the purpose of earnings per share? A company that has no outstanding securities that could potentially dilute EPS. A company that is not traded on the major stock exchanges. A company that has no complex earning-related transactions. Which of the following is correct regarding stock options and other share-based plans? They typically are awarded based on the age of the company's employees. They typically are awarded based on age at retirement. They frequently specify a performance or market condition. Pfeffer Company reports net income of $360 million for 20X1; the company's tax rate is 40%. At the beginning of the year, 200,000 common shares were outstanding. On August 1, the company issued an additional 120,000 shares. Weighted-average shares will be 250,000. Reason: [200,000 + (120,000 x 5/12)] Which of the following is a likely advantages of employee share purchase plans for employers? Increased employee loyalty to the company. Enhanced earning per share for the purchase year. Higher stock prices immediately after the purchase. Which of the following will result in the distribution of additional shares? (Select all that apply.) Stock splits Stock dividends Cash dividend Investors' desire to focus on one number that may summarize a company's performance may explain the importance of earnings per share When a company reacquires its own shares, and weighted-average shares are calculated for the purpose of determining EPS, the reacquired shares that are subtracted from the weighted-average calculation are weighted for the period that they are outstanding. entire fiscal period. period that they are not outstanding. Which of the following would prevent Norbert Company from having a simple capital structure for the purpose of reporting EPS? cash dividends stock dividends convertible preferred stocks nonconvertible preferred stocks nonconvertible bonds In calculating EPS, preferred stock dividends are subtracted from the numerator because EPS represents earnings available to ___________ shareholders common Which of the following may result in potential common shares? nonconvertible bonds nonconvertible preferred stocks convertible bonds common stocks authorized convertible preferred stocks convertible bonds Salt Company reports net income of $360 million for 2017; the company's tax rate is 40%. At the beginning of the year, 200 million common shares were outstanding. On July 1, Salt sold an additional 80 million shares and on October 1 distributed a 10% stock dividend. On December 1, the company reacquired 24 million of its outstanding shares. The company's weighted-average shares for the purpose of calculating basic EPS will be 262 million. Reason: [(200 + [80 x 6/12]) x 1.1] - 24/12 For the purpose of deriving EPS, securities are considered dilutive if they are capable of reducing earnings per share. Which of the following are subtracted when determining earnings available to common shareholders? preferred stock dividends The way we take into account the dilutive effect of stock options is referred to as the ___________ stock method Treasury Securities that may become common shares in the future are considered potential common shares. Which of the following scenarios will increase total assets and equity? The sale of new shares The method that assumes that a conversion into common stock occurred at the later of the beginning of the period or the time the convertible security is issued is referred to as the ________ method if converted Securities that upon conversion or exercise of potential common shares would increase EPS are referred to as ______________ securities antidilutive The treasury stock method takes into account the dilutive effect of stock options and assumes that the proceeds from the exercise of options are used to sell treasury shares. issue treasury shares. purchase treasury shares. retire treasury shares. Warrants, options, and rights are dilutive if the exercise price is higher than the stocks' end-of-year market price. lower than the stocks' average market price. higher than the stocks' average market price. lower than the stocks' end-of-year market price. Warrants, options, and rights are antidilutive if the exercise price is lower than the stocks' average market price. lower than the stocks' end-of-year market price. higher than the stocks' average market price. higher than the stocks' end-of-year market price. Which of the following strategies will simplify the determination of whether convertible securities are dilutive or antidilutive to EPS? Assume all convertible securities are dilutive. Calculating EPS, including each possible combination of convertible securities. Comparing the incremental effect of the conversion. If convertible bonds are assumed to have been converted, the numerator would be assumed to ____ by the ______ effect of the interest saved. increase; after-tax The goal of diluted EPS is to report the _____ potential dilution that might result from the conversion or exercise of securities and equity contracts. Highest Antidilutive securities are excluded from the calculation of EPS because they would increase EPS Horst Company has 50,000 stock options outstanding. The option exercise price is $13 per share, the average market price of the stock was $12 per share during the year, and the end-of-year stock price was $14. For the purpose of calculating EPS, these stock options are dilutitive/anti/neither antidilutive. A strategy that simplifies the determination of whether convertible securities are dilutive is to compare their ________ effect on earnings per share. incremental In calculating diluted EPS under the treasury stock method, one component of the proceeds from the exercise of options include par value of the common shares issued