Exam 19: Accounting for Employee Compensation and Benefits

Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 120,000 options were granted for 120,000 $1 par common shares. The exercise price equals the $8 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $4 based upon an option pricing model. What is the journal entry to record the exercise of 85% of the options during Year 4 when the market price of the stock was $10?

Which of the following statements regarding IFRS disclosures for defined benefit pension plans is incorrect?

An underfunded pension plan increases a company's leverage.

Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 120,000 options were granted for 120,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $3 based upon an option pricing model. What is the entry to record the expiration of 15% of the options on December 31, Year 5?

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. Assuming that all compensation expense has been recorded, record the journal entry to reflect the expiration of 3,000 options that were never exercised.

Apple Plumbing reports actual returns on plan assets of $200,000, while the expected return was $181,000. In addition, an employee wellness program has resulted in changes in actuarial assumptions that result in an increase in the PBO of $24,000. What is the journal entry to record the change in actuarial assumptions?

How does IFRS differ from GAAP when accounting for defined-benefit pension plans?

Which of the following is a characteristic of a defined-contribution pension plan?

Which of the following is not a key element of pension expense under a defined-benefit pension plan?

An employee will generally exercise stock options only when the current market price is above the exercise price of the option.

Which of the following is a characteristic of a defined-benefit pension plan?

Merciful Industries has a beginning PBO balance of $600,000 and a settlement rate of 6%. As a result of an amendment to the current union contract, there are prior service costs of $52,000. What is the journal entry to record interest expense on the pension obligation?

Under a defined-benefit pension plan, employees are responsible for losses on plan assets.

Which of the following statements about liability-classified awards is true?

On January 1, 2017, Cable Corporation issues 15,000 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 $9 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 $12 per share December 31, 2018 $15 per share December 31, 2019 $13 per share What is the appropriate journal entry on December 31, 2019? (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

Which of the following statements about defined benefit pension plans is correct?

Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 110,000 options were granted for 110,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $4 based upon an option pricing model. What is the fair value of the award?

The value of stock options expected to be forfeited reduce compensation expense.

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

What is the primary difference in defined-benefit pension disclosures between U.S. GAAP and IFRS?