Exam 19: Accounting for Employee Compensation and Benefits

At December 31, Year 1, Musslewhite Corporation reported a net loss of $2.5 million related to its pension plan, because the actuarial assumptions related to future salary levels changed. Musslewhite's entry to record the results of this change will include ________.

Walker, Incorporated Walker, Incorporated uses stock options as a compensation incentive for its top executives. On January 1, Year 1, 25,000 options were granted, each giving the holder the right to acquire one $5 par common share. The exercise price is $60 per share. The vesting period is 4 years. Options vest on January 1, Year 5 and cannot be exercised before that date and will expire on December 31, Year 8. The fair value of the 25,000 options, estimated by an appropriate option pricing model is $50 per option. -Refer to Walker Corporation. Make the journal entries to record compensation expense for Year 1.

What is the effect of an equity-classified award of stock options on the grant date?

Under a defined-benefit plan, the contribution is fixed but benefits can vary.

Which of the following statements is true concerning adjustments to Compensation Expense?

On January 1, 2017, Cable Corporation issues 12,500 stock-appreciation rights to its key executives. The terms of the plan state that the holders of the rights will receive a cash payment equal to the difference between the market price of the stock on the date of exercise and the pre-established price of $8 per share. There is a three-year vesting period and the rights may be exercised on January 1, 2020. The rights expire on January 1, 2022. The closing market prices follow: December 31, 2017 $11 per share December 31, 2018 $14 per share December 31, 2019 $12 per share What is the appropriate journal entry when the stock-appreciation rights are exercised on January 1, 2020 when the market price is $12 per share?

Which of the following statements is false?

Accountants must make a judgment about the probability of forfeiture in a stock-based compensation plan.

Nonpublic entities are not required to separately disclose the components of net periodic benefit cost for pensions.

Amortizing a net actuarial loss for pensions will ________.

On January 1, Year 1, Axis Corporation granted employees 50,000 stock options for 50,000 shares of $2 par value common stock. The exercise price on the date of issue was equal to the market price of $24. There is a two-year vesting period and the options expire in four years. Employees have the right to sell back the shares to the corporation within six months of exercise. At the time of issue, the fair value of the options is estimated to be $38 per option. Two years later, on January 1, Year 3, the options are exercised. What are the appropriate journal entries on the date that the options are granted, at the end of Year 1, at the end of Year 2, and on the date that the options are exercised?

The initial journal entry to record an equity-classified award of stock options increases stockholders' equity on the balance sheet.

Which of the following is not a factor in calculating a defined benefit for a pension?

List and describe the five components of annual pension expense.

Which of the following statements regarding disclosures for stock-based compensation plans is false?

Which of the following areas is not an area that financial statements users seek to analyze in a company's defined benefit pension plan?

Which of the following measures of benefit obligations does the FASB require for pension computations?

When pension plan assets exceed pension plan obligations, the pension plan is overfunded.

A higher than expected return on plan assets increases pension costs.

The fair value of stock options on the date of grant is usually readily determinable.