Problem 16-4 5 years Date Account Titles and Explanation Debit Credit __________
ID: 2401174 • Letter: P
Question
Problem 16-4
5 years
Date
Account Titles and Explanation
Debit
Credit
__________-
12/31/17____________
____________
_____________
_______________
12/31/17___________
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Date
Account Titles and Explanation
Debit
Credit
__________
___________
12/31/17______________
______________
Date
Account Titles and Explanation
Debit
Credit
________________-
_____________
12/31/17 _____________
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Problem 16-4
Assume that Amazon.com has a stock-option plan for top management. Each stock option represents the right to purchase a share of Amazon $1 par value common stock in the future at a price equal to the fair value of the stock at the date of the grant. Amazon has 5,100 stock options outstanding, which were granted at the beginning of 2017. The following data relate to the option grant.Exercise price for options $39 Market price at grant date (January 1, 2017) $39 Fair value of options at grant date (January 1, 2017) $6 Service period
5 years
Prepare the journal entries for the first year of the stock-option plan. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)Date
Account Titles and Explanation
Debit
Credit
1/1/17 __________
__________-
12/31/17____________
____________
1/1/17 ______________
_____________
_______________
12/31/17___________
_______________-
Prepare the journal entries for the first year of the plan assuming that, rather than options, 720 shares of restricted stock were granted at the beginning of 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)Date
Account Titles and Explanation
Debit
Credit
1/1/17_________________
__________
___________
12/31/17______________
______________
Now assume that the market price of Amazon stock on the grant date was $43 per share. Prepare the journal entries for the first year of the plan assuming that, rather than options, 720 shares of restricted stock were granted at the beginning of 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)Date
Account Titles and Explanation
Debit
Credit
1/1/17 _____________
________________-
_____________
12/31/17 _____________
________________
Amazon would like to implement an employee stock-purchase plan for rank-and-file employees, but it would like to avoid recording expense related to this plan. Which of the following provisions must be in place for the plan to avoid recording compensation expense?Provisions (1) Substantially all employees may participate.
Relevant or Irrelevant
(2) The discount from market is small (less than 5%).Relevant or Irrelevant
(3) The plan offers no substantive option feature.Relevant or Irrelevant
(4) There is no preferred stock outstanding.Relevant or Irrelevant
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Explanation / Answer
SOLUTION
D.
S.No. Date Accounts title and Description Debit ($) Credit ($) A 1/1/2017 No entry required 12/31/2017 Compensation expense [(5,100*$6)/5years] 6,120 Paid in capital- stock options 6,120 B 1/1/2017 Unearned compensation (720*$39) 28,080 Common stock (720*$1) 720 Paid in capital in excess of par 27,360 12/31/2017 Compensation expense 5,616 Unearned compensation (28,080/5 years) 5,616 C Part A No change for part A, unless fair value of options change. Part B 1/1/2017 Unearned compensation (720*$43) 30,960 Common stock (720*$1) 720 Paid in capital in excess of par 30,240 12/31/2017 Compensation expense (30,960 / 5) 6,192 Unearned compensation 6,192