Intermediate Accounting 6e Spiceland Chap019answer文档格式.docx
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Intermediate Accounting 6e Spiceland Chap019answer文档格式.docx
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Compensationcostisthefairvalueoftherestrictedstockatthegrantdateandisequaltothemarketpriceofunrestrictedsharesofthesamestock.Thefairvalueofsharesawardedunderarestrictedstockawardplanisaccruedtocompensationexpenseovertheserviceperiodforwhichparticipantsreceivetheshares.Thisusuallyistheperiodfromthedateofgranttowhenrestrictionsarelifted(thevestingdate).
Question19-2
Thefairvalueofastockoptionisdeterminedbyemployingarecognizedoptionpricingmodel.Theoptionpricingmodelshouldtakeintoaccountthe
(1)exercisepriceoftheoption,
(2)expectedtermoftheoption,(3)currentmarketpriceofthestock,(4)expecteddividends,(5)expectedrisk-freerateofreturnduringthetermoftheoption,and(6)expectedvolatilityofthestock.
Question19-3
Therecipientpaysnotaxatthetimeofthegrantortheexerciseoftheoptionsunderanincentiveplan.Instead,thetaxonthedifferencebetweentheoptionpriceandthemarketpriceattheexercisedateispaidonthedateanysharesacquiredaresubsequentlysold.Theemployergetsnotaxdeductionatall.
Theemployeecannotdelaypayingtaxunderanonqualifiedplan.Thetaxthatcouldbedeferreduntilthesharesaresoldunderanincentiveplanmustbepaidattheexercisedateunderanonqualifiedplan.Ontheotherhand,theemployerisallowedtodeductthedifferencebetweentheoptionpriceandthemarketpriceontheexercisedate.Thus,anonqualifiedplanoffersfavorabletaxtreatmenttotheemployer,whileanincentiveplanoffersfavorabletaxtreatmenttotheemployee.
AnswerstoQuestions(continued)
Question19-4
Forperformance-basedoptionsinitialestimatesofcompensationcostaswellassubsequentrevisionsofthatestimatetakeintoaccountthelikelihoodofbothforfeituresandachievingperformancetargets.Ifitisprobablethattheperformancetargetwillbemet,werecognizecompensationoverthevestingperiodatfairvalue.Ifachievingthetargetisnotprobable,nocompensationisrecorded.Probabilityisreassessedeachperiod.
Iftheawardcontainsamarketcondition(e.g.,ashareoptionwithanexercisabilityrequirementbasedonthestockpricereachingaspecifiedlevel),thennospecialaccountingisrequired.Thefairvalueestimateoftheshareoptionalreadyimplicitlyreflectsmarketconditionsduetothenatureofshareoptionpricingmodels.Thus,werecognizecompensationexpenseregardlessofwhen,ifever,themarketconditionismet.
Question19-5
Afirmhasasimplecapitalstructureifithasnopotentialcommonsharesoutstanding.Thesearesecuritiesthatarenotyetcommonstock,butmightbecomecommonstockifexercisedorconverted.Thus,theycouldpotentiallydilute(meaningreduce)earningspershare.
Forafirmwithasimplecapitalstructure,EPSissimplyearningsavailabletocommonshareholdersdividedbytheweighted-averagenumberofcommonsharesoutstanding.
Question19-6
Thereisafundamentaldifferencebetweentheincreaseinsharescausedbystockdividendsandstocksplitsandanincreasefromsellingnewshares.Whenadditionalsharesaresold,boththeassetsofthefirmandshareholders’equityareincreasedbyanadditionalinvestmentbyowners.Ontheotherhand,stockdividendsorstocksplitsmerelyincreasethenumberofshareswithoutaffectingthefirm’sassets.Asaconsequence,thesame“pie”isdividedintomorepiecesresultinginalargernumberoflessvaluableshares.Sharesoutstandingpriortoastockdividendorstocksplitareretroactivelyrestatedtoreflecttheincreaseinshares,asifthedistributionoccurredatthebeginningoftheperiod.Ontheotherhand,anynewsharesissuedare“time-weighted’bythefractionoftheperiodtheywereoutstandingandthenaddedtothenumberofsharesoutstandingfortheentireperiod.
Question19-7
Theweighted-averagenumberofsharesforcalculatingEPSwouldbe104,500determinedasfollows:
100,000(1.05)–1,200(5/12)=104,500shares
sharesstocktreasury
atJan.1dividendshares
adjustment
The1,200sharesretiredareweightedby(5/12)toreflectthefacttheywerenotoutstandingthelastfivemonthsoftheyear.Purchasesofsharesthatoccurafterastockdividendorsplitarenotaffectedbythedistribution.
Question19-8
PreferreddividendsaredeductedfromthenumeratorintheEPSfractionsothat“earningsavailabletocommonshareholders”willbedividedbytheweighted-averagenumberofcommonshares.Anexceptionwouldbewhenthepreferredstockisnoncumulativeandnodividendsweredeclaredinthereportingperiod.AnothertimethedeductionisnotmadeiswhenthepreferredstockisconvertibleandthecalculationofEPSassumesthepreferredstockhasbeenconvertedandthereforenodividendsarepaid.
Question19-9
BasicEPSdoesnotreflectthedilutiveeffectofpotentialcommonshares.Ontheotherhand,dilutedEPSincorporatesthedilutiveeffectofallpotentialcommonshares,iftheeffectisnotantidilutive.
Question19-10
WhencalculatingdilutedEPS,weassumethatthesharesspecifiedbystockoptions,warrants,andrightsareissuedattheexercisepriceandthatthehypotheticalproceedsareusedtobuybackastreasurystockasmanyofthosesharesascouldbeacquiredattheaveragemarketprice.
Question19-11
ThepotentiallydilutiveeffectofconvertiblebondsisreflectedindilutedEPScalculationsbyassumingthebondswereconvertedintocommonstock.Theconversionisassumedtohaveoccurredatthebeginningoftheperiod,oratthetimetheconvertiblebondswereissued,iflater.Whenconversionisassumed,theadditionalcommonsharesthatwouldhavebeenissueduponconversionareaddedtothedenominatoroftheEPSfraction.Thenumeratorisincreasedbytheafter-taxinterestthatwouldhavebeenavoidedifthebondsreallyhadnotbeenoutstanding.ThiseffectisreflectedindilutedEPScalculationsonlyiftheeffectisdilutive.
Question19-12
ThepotentiallydilutiveeffectofconvertiblepreferredstockisreflectedindilutedEPScalculationsbyassumingthepreferredstockwasconvertedintocommonstock,justasisdonewithconvertiblebonds.Theconversionisassumedtohaveoccurredatthebeginningoftheperiod,oratthetimetheconvertiblepreferredstockwasissued,iflater.
Whenconversionisassumed,theadditionalcommonsharesthatwouldhavebeenissueduponconversionareaddedtothedenominatoroftheEPSfraction.SinceEPSarecalculatedasifthepreferredshareshadbeenconvertedintocommonshares,therewouldbenodividendsonthepreferredstock;
so,earningsavailabletocommonshareholdersarenotdecreasedbythedividendsthatotherwisewouldhavebeendistributedtopreferredshareholders.Thisissimilarinconcepttoafter-taxinterestbeingaddedbacktonetincomeifthesecuritieswereconvertiblebondsbecauseineachsituation,iftherearehypotheticallynodividendsornointeresttobepaid,thennetincomewouldreflectearningshypotheticallyavailabletoonlycommonshareholders.ThiseffectisreflectedindilutedEPScalculationsonlyiftheeffectisdilutive.
Question19-13
TheorderinwhichconvertiblesecuritiesareincludedinthedilutiveEPScalculationisdeterminedbycomparingtheincrementaleffectoftheirconversion.Theyshouldbeincludedinnumericalorder,beginningwiththelowestincrementaleffect(thatis,themostdilutive).
Question19-14
Forthetreasurystockmethod,“proceeds”include
(1)theamount,ifany,receivedfromthehypotheticalexerciseofoptionsorvestingofrestrictedstock,
(2)thetotalcompensationfromtheawardthat'
snotyetexpensed,and(3)thedifferencebetweentheeventualtaxbenefitandtheamountrecognizedinexpense.
Question19-15
ContingentlyissuablesharesareconsideredoutstandinginthecomputationofdilutedEPSwhentheywilllaterbeissueduponthemerepassageoftimeorbecauseofconditionsthatcurrentlyaremet.Ifthisyear’soperatingincomewere$2.2million,theadditionalshareswouldbeconsideredoutstandinginthecomputationofdilutedEPSbysimplyadding50,000additionalsharestothedenominatoroftheEPSfraction:
Contingentlyissuableshares:
nonumeratoradjustment
———————————
+50,000
additional
shares
Ifconditionsspecifiedforissuancearenotyetmet,theadditionalsharesareignoredinthecalculation.Thiswouldbethecaseifthisyear’soperatingincomehadbeen$2million.
Question19-16
ThecalculationofdilutedEPSassumesconvertiblebondshadbeenconvertedatthebeginningoftheyear(unlesstheyactuallywereissuedlater).Iftheyactuallyhadbeenconverted,theactualconversionwouldcauseanactualincreaseinsharesattheconversiondate.Theseadditionalshareswouldbetime-weightedfortheremainderoftheyear.Thenumeratorwouldbehigherbecausenetincomeactuallywouldbein
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