CHAPTER 28 SHARE-BASED COMPENSary ON Share options Problem 28-1 (AICPA Adapted) Inconnection with a share option plan for the benefit of key empo Ward Company intends to distribute treasury shares when the pin are exercised. These shares wer Te previously bought at P42 per shar The par value per share is P30, On January 1,2019, the enti ity granted share options of 100,000stas an option price of P38 Per share as additional compensator Services to be rendered Over the next three years. The options are exercisable 1,2022,b > DY grantee still employed by the entity. Market price Of share was P. The fair value we during a 2-year period beginning au" 47 at the grant date. 0 otis ied SH option is P12 on grant date. Allis? ete exercised during 2022, 1, What + expe mou should be Teported as compensation &P "600,009 400,009 300,009 450,009 What amo ac Of the share SHOU bg oe jum up" © OPtiong : ZeCo share prem NA ions in apps enized as Ppyjyion 28-1 Jue sion 1 Answer b v re of share options (100,000 x 12) fail pensation for 2019 (1,200,000 /3 years) col (Question 2 Answer c Journal entries 2019 Salaries Share options outstanding 2020 Salaries Share options outstanding 2021 Salaries Share options outstanding 2022 Cash Share options outstanding Treasury shares Share premium Option Price (100,000 x 38) fare Options outstanding Total consideration 400,000 400,000 400,000 3,800,000 1,200,000 Cost of treasury shares (100,000 x 42) Share premium FRS in 4.20000 400,000 £00,000 400,000 400,000 400,000 4,200,000 800,000 3,800,000 1,200,000 5,000,000 4,200,000 800,000 meh 10, mandates that the fair value method shall be ‘ning the compensation arising from share options. “eans thay me “Very hi tthe Compensation is equal to the fair value of: the share quit¢ of grant, The compensation is recognized as he Vesting or service period of 3 years.a Adapted) 28-2,(AICPA Problem 08 ak Company granted share onion, . ie cniees as additional compen s , yen re for 100,000 ordinary shares of P} Opa The options wes mer sae 7 option price PAOD . vatkt price of this a ony Dis PB. 0. The bi f each share option , . _ oregen’ were exercisable immediately deginin s lay Ls oi ecpifean ecember 31, 2020. 2015 : is + options were exercised. hi 1 What amount of compensation expense Should be repo, al ' 2019? a. 800,000 « b. 500,000 c. 200,000 d. 125,000 hare : uld be recognized as share premium upon exer . What aro srson December 31,2019? . In of the shar a. 1,300,000 b. 1,000,000 c. 500,000 d. 900,000 Solution 28-2 Question | Answer a Fair value of share options (100,000 x 8) 800,000 Ifthe options vest immediately, the total fair value of the share options shall be recognized immediately in full as expense. Question 2 Answer a Option price (100,000 x 15) : 1,500.00 Fair value of share Options 00,000 Total consideration “mu Par value of shares (100,000 x 19) Share premium 0,008 20.pn Sp 0 2019, Newman Com ff e30°30,000 P2 10 jap 30,000 P20 par y; Pany gran My i The market price ofa ord a fe fe Was P30. share ont, shag at Pe gcholes option pri; al date cg al a P5,doo model me “ite c i Te a ee i oe ‘The options expire on Janey ag 2m, 3" 45,2022, when th 30, 2093, Meth quite , 2022, e ; tions. ono sions were ‘exercised Price Ofthe sh - pe fare ; ihatamount should be reported aso ; Was P42 at) ,_1160,000 MPESin ce b. 1,080,000 ‘or20219 : 5,400,000 {2,700,000 amount should be recognized © ofshare options in 2022? as share premium uponexerise 3, 5,400,000 b, 5,700,000 c 4,620,000 d. 300,000 Solution 28-3 Question 1 Answer b fo compensation (5,400,000 / 2.5 years) 2,160,000 compensation from July 1 to December 31, 2019 (2,160,000 x 1/2) 4,080,000 Question 2 Answer b Option pri eed Aad (30,000 x 30) i 5,400,000 lue of share options — total compensation eee Tol considerati oot a eration 60,000 ie of shares (30,000 x 20) 700,000 oa hh ete premiumd problem 28-4 (AICPA Adapted) Kline Company granted Morgan On Janua y" ls options to buy 10,000 me a. s compensa par value. st ail price of P20 per share and we oye ‘al a er rant date. Morgan exerciseg th Ci 3 years follow! 3 yea oral 1, 2019. me of the share was P60 on January | 0 : mar era 2019. The fair value of the state Ie P30 on the date of ora ig, What is the net increase in snareholders’ equity “ aren grant and exercise of the options? a. 200,000 b. 300,000 c. 500,000 d. 700,000 Solution 28-4 Answer a To record the compensation for 2019: Salaries (10,000 x 30) 300,000 Share options outstanding 300,000 Observe that the options vest immediately and therefore the tot fi value of the share options is recognized as ‘expense in full in 2019. Te effect of the entry on shareholders’ equity is offsetting. Torecord the exercise of the options on December 31, 2019: Cash (10,000 x 20) y oo outstanding 300.001 rdinary sh; Say hare captl (10,000 x 10) a The effect of st ‘ne entry on of °200,000, equal to the cake st equity is a net increase” e85 (OFRS) - ip? p#*" 2019, Kamagong Co "ie mployees, conditional oy Sranteg | "0 ie : ploy during the Vesting meets hate og 8 wat options vestat the end of ‘aig vee option has a fair value OfP30, 2° Pio, a calue Pet share is P100 ang theo rata, Ption . Me eqnber 31,2020, 30 employees hay Priceispiay ws is of a Weighted averag © probal bil tan tise, ate ve before the end of the theese a 7 ate ema vil her 39 employees cember 31, 2021, only 20 em loyees wy y sptions are exercised on suchdene® Actually let andall ofthe What amount should be Teported as co 7 wha MPensation €xpense for 750,000 b. 500,000 - c IL. 250,000 4 400,000 1 What emount should be reported as compensation expense for 2020? a. 880,000 b. 380,000 c. 440,000- - d. 300,000 . a {amount should be reported as compensation expense * a. ms 000 b. 880,000 ¢. 380,000 4. 470,000. jum upon exercise 4. What amount should be reported rah eit ofthe share options on December™ vse & 1,370,000 ‘a ” b. 2350-000 - o Uae § 1,350,000 ind 909,000Solution 28-5 Question | Answer b 2019 ; 100 x 30) Fair value of share options (500 x 000/3 Compensation expense for 2019 (1,500, ) Question 2. Answser b 2020 Number of employees Employees who left in 2020 Employees expected to leave Employees entitled to share options Fair value of share options (440 x 100 x 30) Cumulative compensation for 2019 and 2020 (1,320,000 /3 x 2) a D Compensation expense recognized in 20 Compensation expense in 2020 Question 3 Answser d 2021 Number of employees Employees who left in 2020 Employees who left in 2021 Employees entitled to share options Fair value of share options (450 x 100 x 30) Cumulative compensation for 2019 and 2020 Compensation expense in 2021 Question 4 Answer b Option price (45,99 Fair value of share oj Total Consideration Par value of shares Share premium 0 shares x 120) ptions — December 3 1, 2021 (45,000 x 100) 500 ( 30) (_20) 450 1,350,000 (880,000) 470,000 5,400,000 1,350,000 6,750,000 4,500,000Jeo 8-6 (IFRS) oP 1,2019, Paranoid Com on yao are options, conditional y oe Branted ta seni J pO ; ae: ‘mploy until December 3], 995 . €Xecutivers i . Or executive Temaining in the value per share is PSO. The exer; é a Ie exercise Price is Py 00. yer, the exercise price drops to Pgy . ifthe entity, Jo jleastan average 0f 10% per year vee a ; Over the three-year period rant date, the entity estimated that the fy; a mst exerise price is P80, fair value of the share option the exercise price is P100, the fair value of the share option is P25 puring 2019 and 2020, the earnings increased by 11% and 12% respectively: However, during 2021, the earnings increased only by ” : Allshare options were exercised on December 31, 2021. _ What amount should be recognized as compensation expense in 2021? 300,000 - 600,000 150,000 750,000 : 2. What amount should be recorded as ee upon exercise of the share options 0 December 31,2 ? 1,500,000 2,400,000 2,250,000 - 1,650,000 ae se aeoPSolution 28-6 Question 1 Answer © 2019 x 30) ‘ons (30,00 on Fair value of share optio 019900 1000) ey : 3 Compensation expense for — ey The fair value of share option is P3 0 because the sales increas, ; 11% in 2019. 2020 Fair value of share options (30,000 x 30) 00. Cumulative compensation for 2019 and 2020 _ 00,000/3 x 2) Ar | aise expense recognized in 2019 300,09 3 in 2020 3000 Compensation expense ! value of the share option is still P30 because the sales The fai increased by 12% in 2019 or an average of 11.5% for two years, 2021 Fair value of share options (30,000 x 25) 750,000 Cumulative compensation for 2019 and 2020 (600,000) 150,000 Compensation expense in 2021 The fair value of share option is only P25 because the sales increased by 4% in 2021 or an average of 9% only for 3 years. (11% plus 12% plus 4% divided 3 equals 9%). Question 2 Answer ¢ Option pri Fair value of sia opin) D 3,000,080 ~ Dec Total consideration eee : ea 3,750, Par value of shares (30,000 x 50) Share premium ‘Ls00.00t 00yjem28-7 (IFRS) 1,2019, Nova Com; wary - ompany granted i one 300 employees Working in the sales pea toeach 7 options vest at the end of pe share Pp a three-year period provided T mployees remain in the entity’ : the ¢ alli ity’s employ and ou ¢ of sales will increase by more than 10% per a vijue of each share option on grant date is P30. , The pat value per share is P50 and the option price is P60. fthe sales increase by more than 10%, each employee will receive 300 share options. fthe sales increase by more than 15%, each employee will receive 300 share options. On December 31.2019, the sales increased by more than 10% but not more than 15%, and no employees have left the entity. On December 31, 2020, sales increased by more than 15% and no employees have left. On December 31, 2021, the sales increased by more than 15% and 50 employees left the entity. Allof the share options were exercised on December 31, 2021. 1. What amount should be recognized as compensation expense for 2021? a. 1,200,000 b. 2,250,000 c. 900,000 d. 450,000 nv . What amount should be recognized as share premium upon’ exercise of share options on December 31, 2021? a. 3,150,000 b. 3,000,000 900,000 4. 750,000ae solution 28 nt Answer d Questio 2019 Fair value 2 sation expense " reased by more than 10% but not a et eas oe re fore, each employee is entitled to 200 st ly f share options (300 x 200 x P30) expense for 2019(1,800,000) Ly Compe! es incl The sales In i 2019 and there ; Ong 2020 fe a3 Fair value of share options (300 x 300 x 30) 2, Cumulative compensation for 2019 and 2020 SX ul a 2,700,000/3 x 2) oat Wy competion expense recognized in 2019 cal Compensation expense in 2020 Lig Each employee is entitled to 300 share options because the increased by more than 15% in 2020. ly 2021 Number of employees Employees who left in 2021. GH Employees entitled to share options a Fair value of share options (250 x 300 x P30) 2,250,000 Cumulative compensation for 2019 and 2020 (1,800,00) Compensation expense in 2021 450,000 Each employee is entitled to 300 share options because the sales Iereased by more than 15% in 2021, Question 2 Answer b Option price (250 x 309 = 75,000 sh et Fair value of share options — December'31. 2021 2 Pos consideration srs value of shares. (75,099 sa Share Premium — su sa0 78-8 (IAA) se! = L. 2019, Vicar Company ini nitia al po" ‘share option plan The pe ee tforma ns in 2021. INCE bag, a a rhe in ided for share option: opt rovl 7 Ons to awa plant the following basis: T4ed 10 the « ss op Net sal he employees et sales range el Opti, i Less than 2,500,000 Ptions ranted P2,500,000— 4,999,999 10,000 P5,000,000— 10,000,600 20,000 More than — 10,000,000 H.000 0,000 poptions become exercisable on January 1,202. The on . tions re exercised on December 31, 2022, option excercise price is P200 per share and the par value is 100 per share. January 1, 2019, each option had a fair value of P90. eshare market prices on selected dates in 2019-2021 were: liwary 1, 2019 250 cember 31, 2019 300 ember 31, 2020 350 ember 31, 2021 320 “seach year were 4,500,000 5,500,000 7,000,000hat mount should be reported 48 compenaay, What! om, 2019" 450,000 990,000 600,000 d 300,000 What amount should be reported as compen sation 2020” a. 2,700,000 b. 1,200,000 c. 1,800,000 4. 1,500,000 _ What amount should be reported as compensation « 7 2021? a. 1,200,000 b. 1,800,000 c. 600,000 d. 900,000 . What amount should be credited to share premium upone= of the share options on December 31, 2022? 5,700,000» 2,700,000 3,000,000 4,200,000 ie eaese8 nt (0! wl" y Answer € yt 0 of share options (20,000 x 90) cai ; ‘eo expense for 2019 (1,800,099/3) 20,000 co ; ; ~ - nue . my He revenue of P4:500,000n 2019s within the Les au qthereFOres he employees are entitled t 29 ries 2 range guest 2 Answer 2 ‘are options, 120 airvalue of share options (30,000 x 99) 2.70 2,700,000 ulative compensation for 2019 200,000 CHf9,100,000/3 x 2) and 2020 canipensation expense recognized in 2019 ( goto compensation expense in 2020 “ann The sales revenue of P5,500,000 in 2020 is within the Level 3 range and therefore, the employees are entitled to 30,000 share options. Question 3 Answer d 021 Fair value of share options (30,000 x 90) 2,700,000 Cumulative compensation for 2019 and 2020 1,800,000) Compensation expense in 2021 900,000 The sales revenue of P7,000,000 in 2021 is within the Level 3 range and therefore, the employees are ‘entitled to 30,000 share options Upon vesting. Question 4 Answer 4 6.000000 Option price (30,000 x 200) : 700,000 ait value of share options “4,700,000 00 Total consideration 3,090,000 at value of shares (30,000 X 100) 5,700,000 Share premium9 (IFRS) problem 28 9 50,000 share opti granted 150, fe Options 000,000. The options yi tog, est in gino ose COMP PO, ° ane el ie within tO ‘years from vesting date," "tree", arlo model wat used to value the ory: Seay d the par value is P5Q tions h J ok c The Meps0 per share a : 1, 2019, which is the date of : On nloyees the entity during the vesthr oe the = 5 i ise mber 31, 0, the estimate of emplo om OOee date js revised to 6%. ees ein, On December 31, 021, only 5% of the employees ao , entity. tual On Decem options when 1. What, amount sho 2019? a. 1,900,000 ~ b. 2,000,000 c. 1,200,000 d, 2,850,000 What amount should be reported as compensation expe Sef "2020? a. 3,760,000 b. 1,860,000 - c. 1,504,000 d. 1,880,000 What a fee should be reported as compensation expenseit a. 2,000,000 b. 1,900,000 « c. 1/880,000 a 1,940,000 4. Wh us . ieee of share premium should be credited up an are options on December 31, 2022? a. 3,000,000 b. 4,000,000 ©. 7,000,000 d. 0 January 7 « Jeaving lye per 31, 2022, the employees exercised | 99 : 00 the market value is P150 per share. . uld be reported as compensation | ey Pens,9 tion a sion! Answer a a nati ative compensation ~ Decem 4 00 X 95% /3) ber 31, 29) 0 (6,009 9 peston 2 Answer b jative compensation — De 076,000,000 x 94% /3 x2) cumulative compensation — December 31,2019 Cember 31, 2999 compensation expense in 2020 Question 3 Answer d Cumulative compensation — December 3] 2021 (6,000,000 x 95%) : Cumulative compensation — December 3 1, 2020. Compensation expense in 2021 Question 4 Answer c Option price (100,000 options x 80) Fair value of share options exercised (100,000 x 40) Total consideration Par value of shares (100,000 x 50) Share premium Fair value per share option ( inl |, 902, Vo 3,760,000 (900,000 1,860,000 —__= 5,700,000 3,760,000 1,940,000 8,000,000 4,000,000 12,000,000 5,000,000 7,000,000 6,000,000 / 150,000 options) 40problem 28-10 (IFRS) any has granted share options to the ¢ Roxanne ns nexpense to the vesting date ofDece ee total compen male ated at PB, 000,000. 3h ; has bee! sgyhas de cided to settle the award early on Decent . The en' G d since the dat n expense charge e of; one 0 (00,000 for 2019 and P2,100,009 ae 1, The compensation expense that would have been charged n ty, P2,200,000. 7 1, What amount should be reported as compensation Exper, 2021? : _ 2,200.000 8,000,000 . 3,900,000 |. 2,000,000 aecp 2. What amount should be reported as compensation expenseir _ 2021 if the share options are not exercised but instead thee} paid P7,500,000 to the employees? 2,200,000 3,900,000 3,400,000 7,500,000 BoP" wf graph 28, Provides that ifthere jg. ; 2 all recognize Immediately the , would have been recognized fo rhe n 2 Answer c sti0" vs nT for 2019 (om sation for 2020 compel ¢unpensation for 2021 pngraph 28 further provides that any payment made toemployees atiecancelation or settlement of the grant of share Options shall be sounted for as repurchase of equity interest. {ite payment exceeds the fair value of share options, the excess is ognized as an expense. Journal entry to record the payment 7 options outstanding 4,100,000 ties 3,400,000 Cash 7,500,000RS) 0 28-11 gn any granted 60,9 Problem 2019, Alten Comte vest at the omy shag On January 1, The share O Orn in service until th oft, Y Soe ‘employees ie per share is P50, SO. They provide! the par ‘stat price is «the enti cone abt 7 fairvay, tthe date of ot be meas ae : jons share option’ shave? life of4 ee eats 7" The share option: cised within one y sting ty options can ee reP620 December 3 1 2018, P66 on 7 The a Pe December 7 1, 2021 an on Decent 31, 2020, ; a pions were exercised on December 31, 2029, All share 0} i ; - aa chouldbereported as compensation expense: fay a. 120,000 b. 60,000 c. 40,000 d. 30,000 hy, \ 2, What amount should be reported as compensation expense, 2020? a. 360,000 b. 240,000 c. 200,000 d. 180,000 3. What amount should be reported as compensation expenselit 2021? a. 900,000 b. 300,000 ©. 450,000 4. 660,000 4. Whatam : i 20222 unt should be reported as compensation expen 0 a 500,000 b. 375.000 © 600,000 ry H) A ; ajue method is followed ifthe g oh pio easured reli fone fl gpnot De rket Telably. The intringi ra the hae ao of the ma P eof the share over, omdualto € Opti if ce we uestion | Answer c ion price, v ice _ December 31, 2019 io” pet Pe Won rice 2 oF jevalue per share option x) ins! 2 jc value of share options (60,000 x 2) ins! i 120,000 csi expense for 2019 (120,000/3) a 40,000 qhe intrinsic value of share options is Tecognized as expense over te vesting period, not over the life of share options, 0nd Question 2 Answer c intrinsic value of share options (66 - 60=6x 60,000) 360,000 cumulative compensation for 2019 and 2020 (360,000/3 x 2) 240,000 Compensation expense in 2019 ( 40,000) Compensation expense in 2020 200,000 121 Question 3 Answer d Intrinsic value of share options (75 - 60 = 15x 60,000) 900,000 Cumulative compensation for 2019 and 2020 (240,000) Compensation expense in 2021 660,000 2022. Question 4 Answer c Market price — December 31, 2022 . Market price - December >" 02 3 Inctease in intrinsic value at 922 (60,000 x 10) 600,000 Compensation expens? in 2! jce after the vesting period is a t ; : The increase in mar full ‘until the share options are exercised. Tecognized as exPe™ 413Problem 28-12 (IFRS) On January 1, 2019, Easy Company granted 30,099 sh, tg to employees, : dof th “HK, + end of three h The share options vest at uo then. Years Provig employees remain in service U™ rae 4, The option price is P60 and the os a IS also Peg ay ' of grant. The par value of the share 18 0. a ly At the date of grant, the entity concluded that the fai, V ; 7 al share options cannot be estimated reliably. “tot . rs. This meang th, ions have a life of 6 yea . at the on. cantee tg tin three years after vesting, My All share options vested at the end of three eriod Years ang employees left during the three-year period, \ The share prices and the number of share options exercises oe out below. Share price Share options exercised at Yeary 2019 683 2020 7 2021 2022 88 10,000 2023 100 15,000 2024 90 5,000 Required: Determine the compensation expense for each year from 20190 2024 using the intrinsic value method. Solution 28-16 2019 Salaries (90,000 / 3 years) 30,000 Share Options outstanding soe Share options Multiply by intrinsic valu 30,008 Total : © (63-60) a intrinsic value iH) ss7 ,! sare options outstanding 0,000 pes ! ' 00.9 hare options : ae syultiplY intrinsic value (66-60) 30,000 otal intrinsic value —_5 sino mulative compensation ~ Decemp (180,003 x 2 years) 3152020 120,090 compensation recognized in 2019 i 30, compensation expense for 2020 (30,000) 90,000 1 Salaries . ‘ a w Share options outstanding 30,000 ent Share options : Multiply by intrinsic value (75-60) ae Cumulative compensation - December 31, 2021 450,000 Cumulative compensation - December 31, 2020 (120,000) Compensation expense for 2021 330,000 1022 Salaries 390,000 Share options outstanding 390,000 Share options 30,000 Multiply by increase in intrinsic value (88-75) Additional compensation Cash (10,000 x 60) ana Share options outstanding : 500,000 Share capital (10,000 x 50) 380,000 Share premium : (88-60) 2 Intrinsic value per option e options exercised Intrinsic value of shar (10,000 x 28)24 3 Salaries aie 1m ” Share options outstan i 000 - 10,000) Shae re in intrinsic value (100 - 88 Additional compensation 900,009 4 (15,000x60) Sear optits outstanding F 600,099 Share capital (1 5,000 x 50) Share premium c value per option (100 - 60) Intrinsi Intrinsic value of share options exercised (15,000 x 40) 2024 Share options outstanding 50,000 Gain on reversal of share options Share options (20,000 - 15,000) Multiply by decrease in intrinsic value (100 - 90) Decrease in intrinsic value Cash (5,000 x 60) 300,000 Share options outstanding 150,000 Share capital (5,000 x50)" Share premium Intrinsic value per Option (90 ~ 60) Intrinsic val : (5,000.30), share options exercised\_4PTER 29 i BASED COMPENS 4710 ie appreciation rights § 7 yo-t (AICPA Adapted) \! 019, Morey Com; gry), 2019, Morey Company granted v9 cjare appreciation Tights for past seviee He sine Hable immediately and expire on January 1 me “ i — »2021, oie, Dean is entitled to receive ¢ é weak price on the exercise date ar aes ti : es oa et price on didnot exercise any of the rights during 2019. Th ‘-» of Morey’s Share was P30 on Jan haa paste ener 31,2019. wary 1, 2019 and P45 on ssaresult of the share appreciation rights, what amount should be ognized as compensation expense for 2019? ‘ 0 4 100,000 «, 300,000 4 600,000 Solution 29-1 Answer ¢ tet price - December 31, 2019 * determined price on January 1, 2019 2 Ritvalue of share appreciation right & Compensation for 2019 (20,000 x 15) 2on00e The tot rely i ‘al com, ion i ized as expense entirely in 2019 i pensation is recogniz\ Pe seable immediately. use the share appreciation rights are exerciCPA Adapted) 30,000 share Appreciation |. a to reoeive cash equal tq : rh arket price of the share oy the iy ate ce period j € ti The service POM) The market price of the share y, "8h, eerie 075, 2019 and 2020, respectively, "2 9 ani ! p2son vnouit should be rer~rted as liabilit 1 precition rights on December 31, 2020? a. 0 b. 130,000 c. 160,000 d. 240,000 2, What amount should be recorded as compensation expen 2020? Sy a, 120,000 b. 150,000 ¢, d. 'Y Under the ‘ 110,000 10,000 Solution 29-2 Question 1 Answer c Question 2 Answer c Fair value of sh Fetes (25~29) > SPPreciation right December 31, 2019 Mh Fair value of sha iation ri. 089) Te appreciation Tight ~ December 3 1, 2020 Veo Accrued com f Pensation ~ (30,0 =o Dec Accrued oo 8= 240,000 3 x 9 eet 31) 2020 Ge ia Pensation — p, years 160,000 000x573 Years) Ssember 31, 2019 Compensation expense f (50.00 *Pense for 2929 110,00293 (IAA) st" 9019, Alpha c ft 1,2017, Alpha Compa, fered aes ; 0 pee iation rights with th «ed the gp ' . following termes? ™t@gement ¢ ined price ‘ * ee ares P Ft oe 100 per share vise pte 000 shares we Jam, 282s " anuary 1, 292 ae appreciation rights are exerci rest 'sed on Jany , ary 1, 2022, : yoted prices per share are 199 mld. December 31, 2019, Dece I 21, respectively, wd + 124,151 an id 15 mber 31,9 | on January 20 and December 1 What amount should be reported as col 2020? ,, 1,200,000 4, 1,300,000 . 2,550,000 d. 2,150,000 mMpensation expense for 2, What amount should be reported as compensation expense for 2021? a 2,550,000 b. 1,300,000 e. 850,000 4 0 d as gain on reversal of share ar ize 3. What amount should be recogniz price dropped to P120 on appreciation rights if the market December 31, 2021? & 1,000,000 b. 1,700,000 c. 700,000 d 0wolaion 2Y } wor D Question 1 Answer secembet 51) 2019 Awcrued compet "00! 1) (40,000 x? yy = 1,24 Lhy, Decemier 31, 2020 a Acorned «A 1000/3 x2 \ (50,000 51 = 2550), ae 41, 2019 a Awerned compensa jon 4, snse (OF 2020 lange Compensation ¢ spe Sh Question 2 Answer © December 31, 2021 Acerued compensation 250m 50,000.51) - 2020 ma ae compensi ation = December 3 1, 1,700,009 1 Compensation expense for 202 $00 Question 3 Answer € Accrued compensation ~ December 31, 2020 1,700,009 Pair value of share appreciation right - 12/31/2021 (50,000 x 20) 1,000,000 Decrease in liability ~ reversal 700,000 Market price ~ December 31, 2021 120 Predetermined price 100 Fair value of share appreciation right 4 Entry on December 31, 2021 Accrued salaries payable 700,000 Gain on reversal of share appreciation rights 700,000 Entry on January 1, 2022 Accrued salaries pa ch eae 1,000,000 1,000,00049-4 (AICPA Adapted) 1,2019, Omega Com, vary}, Pany granted the chi 0 (CEO) 50,000 share appreciation tights, chief executive ti ns are exercisable immediately ang or Past services, ; ‘ as €xpire on December a CEO is entitled i ci the 4 €d to recejy, sr market price on exercise date oretees i Rees “ The CEO did not exercise any of the vighiin 2019 “ ice of the share was P . market price 0 8 P100 on Januar 1 5 00 December 31, 2019. The CEO exercised the re oe bet 31, 2020 when the market Price was P10, _ atamount should be recognized as reciation rights in 2020? 750,000 500,000 750,000 0 — = ain on reversal of share ution 29-4 Answer c 19 iccrued compensation - 12/31/2019 (50,000 x 15) 750,000 compensation is recognized as expense entirely in 2019 ause the rights are exercisable immediately. aries 750,000 Accrued salaries payable 750,000 020 eerued ion — 12/31/2020 (50,000 x 10) $00,000 compensation — 1 ( (750,000) crud compensation — 12/31/2019 Tease in accrued compensation ‘tued salaries payable eT ses pay 500,000 Gain on reversal of share appreciation rights caw 7 due t 7 The rights December 31, 2020. Only 80% ofthe. ta Way What amount should be reported as accrued comp, 9-5 (IFRS) granted 200 share appreciation, ti Norway cmployees on January 1, 2016. Bhs o vest on December 31, 29 % Ih, a, 1,2016 (Predetermined price) ate i, December 31,2016 ly December 31,2019 I December 31,2020 % 4 January eNsatj December 31, 2019? ty 2,400,000 4,800,000 3,600,000 1,200,000 aeop What amount should be reported as accrued Compensation December 31, 2020? a. 4,000,000 b. 3,200,000 c. 1,600,000 d. 2,000,000 What amount should be appreciation rights on 3,200,000 1,600,000 2,000,000 0 Tecognized as gain on reversal of sat December 31, 2020? aesp-5 wn gon! Answer ye price — December 31, 2019 wt (Fined price get rs in fair value in 2019 ee compensation — Decemb 0 «200 x 60 x 80%) er 31, 2919 tion 2 Answer b y ket price - December 31, 2929 ie v aermined price 082 in fair value in 2020 joorved compensation ~ December 31, 2020 (500 x 200 x 40 x 80%) Question 3 Answer b Accrued compensation — December 31, 2019 Accrued compensation — December 31, 2020 Decrease in liability — reversal journal entry on December 31, 2020 Accrued salaries payable 4,800,000 Cash i. Gain on reversal of share appreciation rig! 3,200,000 | -4,800,000 3,200,000 1,600,000 3,200,000 1,600,000er 29 aaa) proven s9,xristen Company established a Stee, on sa the rxccutVeS: : ~, | rights splan cash at any time dys | ive itled them 1 i en the market price of jy ote, | is W770 on 60,000 share ay Orga, | wr sea eesblished price Drei on or S: Re . hy 000 SARs are exercised by ember 31,2021, 20. keg On Dec iy asc Jamary —_-‘1, 2019 Sperg.* December 31,2019 24 Pas December 31, 2020 soe December 31, 2021 1. Whatamount of eompensation expense should be recy erin * 3019? fy 480,000 120,000 300,000 . 180,000 ae oP wv . What amount of compensation expense should be recognized iy 2020? a. 900,000 b. 420,000 c. 105,000 4. 225,000 we - What amount should be recognized as accrued liability forsta* appreciation rights on December 31, 2021? a 600,000 ». 300,000 © 400,000 4. 200,000yw i 1 Answer a oe _ pecember 31, 2019 Q8 20) ‘ “ expense for 2019 (60,009 x8) ; ithe SARS are exercisable immediately sit? Answer b a _ December 31, 2029 35 ~29 ) eq compensation ~ 12/31/2929 pensation expense in 2019 (6.000 a) il oynpensation expense for 2020 gustion 3 Answer c pir value - December 31, 2021 (30 ~ 20) agoued compensation ~ 12/31/2021 (60,000 x 10) Accrued compensation — December 31, 2020 ain on reversal of SARs Accrued compensation — December 31, 2021 Payment for exercise of SARs (20,000 x 10) Adjusted accrued liability - December 31, 2021 Jounal entries Acerued salaries payable 300,000 Gain on reversal of SARs 200,000 Accrued salaries payable Cash 300,000 200,000problem 29-7 (IF! RS) 9 Module Company ree On January 1, 201 Ain sOOeRan fer appreciation ae ee eanloy for the hs On cong! 4, the employees remain int thre: ta 8, entity during the three-yeg, Vesti Rg No employees left the : 1 i The employees exercised their share appreciation right s q 7 ol December 31, 2021 100 employees "iy December 31, 2022 250 empl oyees 150 employees December 31, 2023 The fair value and intrinsic value of the share appreciation toh ate Fair value Intrinsig mm : q December 31, 2019 15 December 31, 2020 18 December 31, 2021 20 15 December 31, 2022 21 20 25 December 31, 2023 The intrinsic value of the share appreciation right on the dateof exercise is the amount paid out to the employees.e reported ay juld be cony . at she Perisaty, Ney a Nie foe my unt should be reported as COMPENsation « yt Me Kone for any 000 $50,000 * 490,000 450,000 at amount should be reported as Compensation expense for 2021 ; 700,000 , 300,000 <, 350,000 4g, 150,000 ,, What amount should be reported as compensation expense for 2022? a 315,000 b. 500,000 c. 185,000 4 15,000 What amount should be reported as compensation expense for 2023) 375,000 5. 500,000 & 60,000 ‘ 0n 29-7 n 1 Answer a Solutio Questio 2019 250,009 Dec. 31 Salaries ; Accrued salaries payable Share appreciation rights (500 employees X 100) Multiply by fair value Total fair value - Accrued liability — 12/31/2019 (750,000/3) Question 2 Answer b 2020 Dec. 31 Salaries Accrued salaries payable 350,000 Share appreciation rights Multiply by fair value Total fair value Accrued liability — 12/31/2020 (900,000/3 x2) Accrued liability - 12/31/2019 Compensation expense for 2020 2H, 50, NF )z/. 330,01 50,009 _ 900,000 600,000 (250,000) 350,000 — =—salaries Accrued salaries payable 200,000 i 200,000 Share appreciation rights not yet exercised (500 ~ 109 x 100) Multiply by fair value 40,000 Accrued liability — 12/31/2024 — Acerued liability ~ 12/31/2999 Gone Compensation expense for 2021 “m0 000. Salaries 150,000 Cash 150,000 Share appreciation rights exercised (100 x 100) 10,000 Multiply by intrinsic value 15 Total payment 150,000 Compensation related to rights not yet exercised 200,000 Compensation paid for rights already exercised 150,000 Total compensation expense for 2021 350,000Question 2023 Dec. 31 answer 4 acorued salaries payable 485,094 salaries 4 spreciation rights not yet Share aftised (400 ~ 250 X 100) ir value Multiply by fa sonst December 31, 20 Accrued liability 2022 Accrued liability ~ December 31, 2021 Decrease in accrued liability Salaries 500,000 Cash Share appreciation rights exercised (250x! 00) Multiply by intrin: Total payment Reversal ofaccrued liability related to rights not yet exercised Compensation paid for rights already exercised Net compensation expense for sic value 2022 5 Answer ¢ 60,000 Salaries Accrued salaries payable 315,000 Cash Share appreciation rights exercised (150 employees x 100) Multiply by intrinsic value Total payment in 2023 Accrued liability - December 31, 2022 Net compensation expense for 2023 5005, 25 5 Wy (485,009) 500,00 $5 375,000 15,000 375,000 aus 60,00040-8 Share and cash alte Native IFne y 1.2019, Ingenuous Com (IFRS) Ha ch0ose either: "pany Branted to ay ' "Mployee f cares (chare or equi / 0 5900 quity alternative) -jsht PAY ment equal to market Value of a bye ti ®) 1000 shares (cash is conditional upon the ‘ reo ee © completion of thr €€ Yeats of service f »employee chooses the share alternative, the sh so three years after vesting date. vine Shares must be pat value of the share is P25 and at : rant 9, the share price is PS1. Grant date on January 1, me share prices for the three-year vesting period are: December 31, 2019 54 December 31, 2020 60 December 31, 2021 65 After taking into account the effects of post-vesting restrictions, the entity has estimated that the fair value of the share or equity alternative is P48 per share.jn 20-8 Share and cash alternative il (IFRs ay 1.2019, Ing ‘) ae — either. Comp ANY granted aahtt 0 CHOOS : anemployee at 12,000 shares (share or equity altemative) nysh payment equal to market y ° p Uae . Val b stemativ e) Ue oF 10,000 shares (cash gegsntis conditional upon the completion of three years of servi . Service. jite employee chooses the share alternative. the shares must be idfor three years after vesting date. Thepar value of the share is P25 and at grant date on January 1, 1019, the share price is P51. Ihe share prices for the three-year vesting period are: December 31, 2019 7 December 31, 2020 és December 31, 2021 t-vesting restrictions, the of pos' . fe of the share or equity Afertaking into account the effects 0 ia ‘tty has estimated that the fair V# ‘ternative is P48 per share.wv * 2019? ‘Dey, What amount should be recorded as Compensati E Me 202,000 \ a. p, 180,000 c, 268,000 4, 540,000 What amount should be recorded as Compensation, 2020? "Pet 220,000 242,000 400,000 286,000 fh ‘n Beep What amount should be recorded as compensation ee 2021? 650,000 316,000 272,000 250,000 Penge fy Beep What amount should be recorded as share premium if ty employee has chosen the share alternative? 400,000 466,000. 350,000 416,000 acre . What amount should be recorded as share premium if the employee has chosen the cash alternative? 716,000 . 650,000 66,000 0 ae re8 iol we 7: Answer a io” . oy yagraph 35, requires that t a 4? pall be accounted for ge “98 his ro ty guest § P ad i my) Parate} Ound financial le Yas liability on eof share alternative (12,000 sh, " yall «ab lity ares x P4g ait of liability on grant date, J ) mt ee i anuary 1, 2019 576,000 one 510,000 eal “<1 Ww I salaries (66,000/3) me Share options outstanding 22,000 22,000 Allocation of the equity com zi ponent e three-year vesting period. qually over the pec. 31 Salaries 180,000 Accrued salaries payable 180,000 Share basis of cash alternative 10,000 Multiply by fair value 54 540,000 Total liability Accrued liability - 12/31/2019 (540,000/3) 180,000 Compensation expense related oa to share options o Compensation expense related 180,000 to cash alternative Total compensation expense for 2019Que 2020 pee Question 3 Answ 2021 Dec. 31 31 sft oJ swer b na An. 22,009 salaries : i I sari options outstanding 220,009 ies . crued salaries payable Share basis of cash alternative Multiply by fair value Total lability Accrued liability - December 31, 2020 *~(600,000/3 x 2 years) «4. December 31, 2019 Compens: Total compensation expense for 2020 (22,000 + 220,000) erc Salaries 22,000 Share options outstanding Salaries 250,000 ‘Accrued salaries payable Share basis of cash alternative Multiply by fair value Total liability - December 31, 2021 Accrued laibility - December 31, 2020 Compensation for 2021 Total compensation (22,060 + 250,000) forantinser d y uti (a . " gettlement chosen by the employes will dey FITTS Hh sal? of mui se has chosen the equity alte ie e vil. 2021 is: yeaa te jour enry a A salaries pay’ able 650,000 ptions outstanding 66.004 ‘f ee capital (12,000 x 25) , Why Wh OFF share premium Nib, geserve that the entity issued 12,000 shares and not 10,000 shares atic serve aS the basis only in computing the liability for the cash sfemativ e. Question 5 Answer c ifthe employee has chosen the cash alternative, the j journal entre December 31, 2021 is: 650,000 Accrued salaries payable 66,000 Share options outstanding, Cash Share premium 650,009 6,000Problem 29-9 (IFRS) On January 1, 2019, Planet Company purchaseq the cash price of P5,000,000. The supplier cay purchase is to be settled. The choices are 50,000 shares is par value of ps, time, or a cash payment equal to the market value Fao, on December 31, 2019. O,0g¢ 3 n January |, 2019, the market prigg of, e date of settlement on Decemb, each hare is P130. er 3], me Cay; ‘Gui Shoo ; At grant date o P110 and on th market price ofeach s L. What amount should be recorded as initial costofthe 7 in a. 2,500,000 b. 5,000,000 c. 4,400,000 d. 5,500,000 2. What amount should be recorded as equity component from the purchase of equipment with share and cash alte a. 500,000 b. 400,000 c. 600,000 d. 0 3. What amount should b recognized as interest expense December 31, 2019 if the supplier has chosen the at alternative? a. 600,000 b. 400,000 c. 800,000 d. 0 4. What amount should be recorded as share pret December 31, 2019 if the supplier has chosea thes alternative? 5,000,000 2,500,000 4,400,000 4,000,000 asiy Mate) Be Tpw eo iA nswer b — cash price Ji soe 5,00 . oo aaa Fa answer c jo” I to th F 7 ipment equal to the cash price of eat 5,000,000 ml jability (40, 000 shares x 110) (4,400,000) oa 600,000 ( —— entry to record the acquisition of the equipment 5,000,000 es nye 4,400,000 ae options outstanding 600,000 pston 3 Answer c pairvalue of liability - December 31, 2019 (40,000 shares x 130) 5,200,000 fairvalue of liability — January 1, 2019 (4,400,000) inplied interest 300,000 Journal entry to record the payment of accounts payable Accounts payable 4,400,000 Interest expense 800,000 Share options outstanding 600,000 Cash 5,200,000 Share premium 600,000 Question 4 Answer b Journal entry to record the issuance of shares Accounts payable 4,400,000 lare options outstanding 600,000 Share capital (50,000 x 50) 2,500,000 Share premium 2,500,000 437Problem 29-10 (IFRS) ted 50,000, On January 1,2019, Jester COMPO) Fe Share Pee period is 4 years, Tp Pt. . rights to employees. The vesting eg on the excess a meat required the entity to pay °°) rp100. The market priog “ke,' : rice ° © er Bh oe Tn eta Company modified the On December 31,2020, J°5° ciation rights Instead, les 00 share 2 ed thatthe Cnt Ca date ae the entity for the next 1° * option is P70. end ie . of the remaining two-ye,,. Tre optionsareexersisbleat a yalueisP100. Peay The option price is P1104 . option pI options were exercised on December 3), ty Only 40,000 share OPH ited. and 10,000 options 1 Vat amount soul be eporteda compensa on PE 250,000 500,000 400,000 300,000 f . 2 yatamount shouldbe reported as compensation expense a. 1,000,000 b. 1,500,000 c. 750,000 d. 500,000 3. Whatamount should be reported as compensation’ expense for22! a. 2,625,000 b. 1,750,000 c. 875,000 d. 500,000 ! 4. \Whatamount should be reported as compensation expense a. 2,800,000 b. 2,400,000 ©. 900,000 4. 175,000 pe oPy i Answer a i” y ice- December 31, 2019 ye oti Fi yeaa iy py number of rights ld campensation peston for 2019 (1,000,000 / 4 years) jul entry ies sere salaries payable 250,000 pestion 2 Answer b \wket price - December 31, 2020 tedetermined price xcess Multiply by number of rights Tol compensation Accrued compensation — December 31, 2020 (1,500,000 / 4 x 2 years) Compensation for 2019 Gnpensation for 2020 ; berease in compensation due to modification in 2020 tal compensation for 2020 Fitvalue of share options — December 31, 2020 (50,000 x 70) ‘ae options outstanding - December 31, a 8,500,000 / 4 x 2 years) "ued compensation — December 31, ae i jon "erase in compensation due to modifica |PERS 2, paragraph B44A, provides (nal he Vash. ge payment is modified to equity-settled, the fo lowing ay be applied: Pha easured at fair value on the mo; 7 viously recognized ig cael icy ely, 1. The share option ism 2. Theaccrued liability P™ nized 3. The difference betwee? theacer ued liability ang me share options is recognized as. an adjustment to gy, expense. Me To accrue the compensation for 2020 Salaries 500,000 Accrued salaries payable : My To cancel the accrued Jiability and record the share OR q Accrued salaries payable 750,000 Salaries : 1,000,000 Share options outstanding Ly Question 3 Answer ¢ ensation — December 31, 2021 Cumulative comp’ (50,000 x 70/4x3) 2500 Cumulative compensation — December 31, 2020 1750000 Compensation for 2021 S750 Salaries 875,000 Share options outstanding a7500 Question 4 Answer d Cumulative compensation — December 31, 2022 (40,000 options actually exercised x 70) aston Cumulative compensation — December 31, 2021 26st Compensation for 2022 sy 175,000 yrs Salaries Share options outstanding