Exam 19: Accounting for Employee Compensation and Benefits

Merciful Industries has a beginning PBO balance of $500,000 and a settlement rate of 6%. As a result of an amendment to the current union contract, there are prior service costs of $49,000. What is the journal entry to record the change to the current union contract?

List the four key areas that minimum disclosures for stock-based compensation plans must address.

Which of the following is a characteristic of the projected benefit obligation measurement?

On January 1, Year 1, Axis Corporation granted employees 53,500 stock options for 53,500 shares of $3 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. The fair value of the options has been estimated to be $39 per option and the company does not expect any forfeitures of the options. What is the journal entry for compensation expense for Year 1?

On January 1, Year 1, Gallagher Corporation issued 700,000 stock options for 700,000 shares to a division manager. The options have an estimated fair value of $10 each. These options are not exercisable unless division revenue increases by 8% in four years. Gallagher estimates that it is probable that the goal will be achieved. What is pretax compensation expense for year 1?

Merciful Industries has a beginning PBO balance of $600,000 and a settlement rate of 6%. What is the journal entry to record interest expense on the pension obligation?

On January 1, 2017, Cable Corporation issues 11,500 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 $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 $14 per share What is the appropriate journal entry on December 31, 2017? (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

When a company amends their existing pension plan to increase the defined-benefit rate, the associated expense is referred to as ________.

Which of the following is a characteristic of the accumulated benefit obligation measurement?

Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 90,000 options were granted for 90,000 $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. At the end of the first year, it is expected that 100% of employees will exercise the options. By the end of Year 2, it is expected that only 80% of the options will be exercised. Schmidt chooses to adjust the Fair value of the options for the estimated forfeitures. What is the journal entry to record compensation expense for year 2? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.)

In a contributory pension plan, employees must fund some or all of their pension costs.

Premier Sports Inc has a beginning PBO balance of $615,000 and a beginning market-related value of plan assets of $550,000. The net actuarial gain at the beginning of the period is $89,000 and the average employee base has a remaining service life of 20 years. What is the corridor?

A stock option plan is generally revalued whenever there is a change in the estimated percentage of options that will be forfeited.

The compensation associated with equity-classified awards of stock options is ________.

An employee will not redeem a liability-classified award when the market price is less than the exercise price.

On January 1, 2017, Bubert Corporation issues 8,500 shares of $2 par restricted stock to its key executives. The market value of unrestricted shares of the same stock on the date of issue is $25 and there is a four-year vesting period. What is the amount of deferred compensation recorded on January 1, 2017?

On January 1, Year 1, Axis Corporation granted employees 82,000 stock options for 82,000 shares of $2 par value common stock. The exercise price on the date of issue was equal to the market price of $22. 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 $31 per option. Unfortunately, the company experiences a series of setbacks and the stock price falls in Year 4. At December 31, Year 4, the options have a fair value of $18 per option. At the end of four years, none of the options have been exercised. What is the appropriate journal entry to record the expiration of the options?

The compensation associated with a share of stock under a restricted stock plan is computed as ________.

On January 1, 2017, Bubert Corporation issues 12,500 shares of $2 par restricted stock to its key executives. The market value of unrestricted shares of the same stock on the date of issue is $19 and there is a four-year vesting period. What is the amount of compensation expense recorded on December 31, 2017?

The accumulated benefit obligation reflects only current salary levels.