ACCT 302 Quiz 3 Income Taxes, Shareholder's Equity, Share Based Compensation, solutions answers

ACCT 302 Quiz 3 Income Taxes, Shareholder's Equity, Share Based Compensation, Earnings per Share solutions complete answers 

 

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During the current year, Stern Company had pretax accounting income of $51 million. Stern's only temporary difference for the year was rent received for the following year in the amount of $26 million. Stern's taxable income for the year would be:

 

Alamo Inc. had $400 million in taxable income for the current year. Alamo also had a decrease in deferred tax assets of $28 million and an increase in deferred tax liabilities of $67 million. The company is subject to a tax rate of 25%. The total income tax expense for the year was:

 

Information for Kent Corp. for the year 2021:
 
Reconciliation of pretax accounting income and taxable income:



Cumulative future taxable amounts all from depreciation temporary differences:



The enacted tax rate was 29% for 2020 and thereafter.
 
What should be the balance in Kent's deferred tax liability account as of December 31, 2021?

 

Assume that Puritan Corp. operates in an industry for which NOL carryback is allowed. Puritan Corp. reported the following pretax accounting income and taxable income for its first three years of operations:



Puritan's tax rate is 37% for all years. Puritan elected a loss carryback.
As of December 31, 2021. Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback.

  
What did Puritan report on December 31, 2021, as the deferred tax asset for the NOL carryforward?

 

In 2020, HD had reported a deferred tax asset of $90 million with no valuation allowance. At December 31, 2021, the account balances of HD Services showed a deferred tax asset of $120 million before assessing the need for a valuation allowance and income taxes payable of $80 million. HD determined that it was more likely than not that 30% of the deferred tax asset ultimately would not be realized. HD made no estimated tax payments during 2021. What amount should HD report as income tax expense in its 2021 income statement?

 

A result of inter-period tax allocation is that:

 

The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars):



The applicable tax rate is 25%. There are no other temporary or permanent differences.
 

Which of the following must Franklin Freightways disclose related to the income tax expense reported in the income statement ($ in millions)?

 

Information for Hobson Corp. for the current year ($ in millions):



The applicable enacted tax rate for all periods is 25%.
 
What should Hobson report as net income?

 

Which of the following statements is true as to GAAP regarding accounting for income taxes, and its use of the asset and liability approach?

 

Schaeffer Corporation reports $67 million accumulated other comprehensive income in its balance sheet as a component of shareholders’ equity. In a related statement reporting comprehensive income for the year, the company reveals net income of $550 million and other comprehensive income of $30 million.
 
What was the balance in accumulated other comprehensive income in last year’s balance sheet? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

 

Assume that the Kelso Company operates in an industry for which NOL carryback is allowed. The Kelso Company had the following operating results:



What is the income tax refund receivable?

 

Penne Pharmaceuticals sold 9 million shares of its $1 par common stock to provide funds for research and development.
 
If the issue price is $14 per share, what is the journal entry to record the sale of the shares? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

Horton Industries’ shareholders’ equity included 270 million shares of $1 par common stock and a balance in paid-in capital - excess of par of $2,160 million.
 
Assuming that Horton retires shares it reacquires (restores their status to that of authorized but unissued shares), by what amount will Horton’s total paid-in capital decline if it reacquires 5 million shares at $7.00 per share? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

 

The Jennings Group reacquired 4 million of its shares at $64 per share as treasury stock. Last year, for the first time, Jennings sold 2 million treasury shares at $65 per share.
 
If Jennings now sells the remaining 2 million treasury shares at $61 per share, by what amount will retained earnings decline? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

 

Following is a recent Giga Tech. press release:
 
REDMOND, Wash.—Nov. 29, 2017 — Giga Tech. on Wednesday announced that its board of directors declared a quarterly dividend of $0.17 per share. The dividend is payable March 8, 2018, to shareholders of record on Feb. 15, 2018. The ex-dividend date will be Feb. 14, 2018.
 
Prepare the journal entries Giga Tech. used to record the declaration and payment of the cash dividend for its 8,500 million shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

On June 13, the board of directors of Siewert Inc. declared a 2-for-1 stock split on its 100 million, $1 par, common shares, to be distributed on July 1. The market price of Siewert common stock was $24 on June 13.
 
Prepare a journal entry that summarizes the declaration and distribution of the stock split if it is not to be effected in the form of a stock dividend. What is the par per share after the split?

 

Roberto Corporation was organized on January 1, 2021. The firm was authorized to issue 95,000 shares of $5 par common stock. During 2021, Roberto had the following transactions relating to shareholders' equity:
 
Issued 10,800 shares of common stock at $5.90 per share.
Issued 19,700 shares of common stock at $8.70 per share.
Reported a net income of $98,000.
Paid dividends of $43,000.
Purchased 3,100 shares of treasury stock at $10.70 (part of the 19,700 shares issued at $8.70).
 
What is total shareholders' equity at the end of 2021?

 

Tim Howard Gloves issued 6.00% bonds with a face amount of $29 million, together with 14 million shares of its $1 par common stock, for a combined cash amount of $54 million. The fair value of Howard's stock cannot be determined. The bonds would have sold for $23 million if issued separately. For this transaction, Howard should record paid-in capital—excess of par in the amount of:

 

Olsson Corporation received a check from its underwriters for $88 million. This was for the issue of one million of its $5 par stock that the underwriters expect to sell for $88 per share.
 
Which is the correct entry to record the issue of the stock?

 

First Link Services granted 20 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within five years. The common shares have a market price of $8 per share on the grant date of the restricted stock award.
 
1. Ignoring taxes, what is the total compensation cost pertaining to the restricted shares?
2. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?
 
(For all requirements, enter your answer in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)

 

The following partial information is taken from the comparative balance sheet of Levi Corporation:
 

How many of Levi's common shares were outstanding on 12/31/2020?

 

Under its executive stock option plan, National Corporation granted 18 million options on January 1, 2021, that permit executives to purchase 18 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $15 per share. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. No forfeitures are anticipated.
 
1. Ignoring taxes, what is the total compensation cost pertaining to the stock options?
2. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives?
 
(For all requirements, enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

 

Under its executive stock option plan, National Corporation granted 25 million options on January 1, 2021, that permit executives to purchase 25 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $29 per share. The fair value of the options, estimated by an appropriate option pricing model, is $3 per option. Suppose that the options are exercised on April 3, 2024, when the market price is $35 per share.
 
Ignoring taxes, what journal entry will National record? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

Under its executive stock option plan, National Corporation granted 30 million options on January 1, 2021, that permit executives to purchase 30 million of the company’s $1 par common shares within the next seven years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $25 per share. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. Suppose that the options expire without being exercised.
 
Ignoring taxes, what journal entry will National record? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

On January 1, 2021, Farmer Fabrication issued stock options for 300,000 shares to a division manager. The options have an estimated fair value of $7 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Farmer Fabrication’s stock price increases by 3% in three years. Farmer initially estimates that it is not probable the goal will be achieved.
 
How much compensation will be recorded in 2021, 2022, and 2023?

 

Lance Chips granted restricted stock units (RSUs) representing 66 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $6 per share on the grant date. The total compensation cost pertaining to the restricted stock units is:

 

At December 31, 2020 and 2021, Funk & Noble Corporation had outstanding 1,240 million shares of common stock and 19 million shares of 4%, $100 par value cumulative preferred stock. No dividends were declared on either the preferred or common stock in 2020 or 2021. Net income for 2021 was $2,804 million. The income tax rate is 25%.
 
Calculate earnings per share for the year ended December 31, 2021. (Round your answer to 2 decimal places.)

 

Under its executive stock option plan, N Corporation granted options on January 1, 2021, that permit executives to purchase 12.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $15 per share. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives? (Round your answer to 1 decimal place.)

 

FX Services granted 13.5 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within two years. The common shares have a market price of $8 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives? (Round your answer to 1 decimal place.)

 

Pastore Inc. granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $32 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $5.50 per option.
 
What would be the total compensation indicated by these options?

 

Pastore Inc. granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $40 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $10.00 per option.

 

What would be the total compensation indicated by these options?

 

On June 13, the board of directors of Siewert Inc. declared a 2-for-1 stock split on its 20 million, $5 par, common shares, to be distributed on July 1. The market price of Siewert common stock was $16 on June 13.

 

Prepare a journal entry that summarizes the declaration and distribution of the stock split if it is not to be effected in the form of a stock dividend. What is the par per share after the split?

 

For the current year ($ in millions), Centipede Corp. had $80 in pretax accounting income. This included warranty expense of $7 and $20 in depreciation expense. Two million of warranty costs were incurred, and depreciation deductions in the tax return amounted to $35. In the absence of other temporary or permanent differences, what was Centipede's income tax payable currently, assuming a tax rate of 25%?

 

The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars):

 

The applicable tax rate is 25%. There are no other temporary or permanent differences.

 

Franklin's taxable income ($ in millions) is:

 

Plutonic Inc. had $400 million in taxable income for the current year. Plutonic also had an increase in deferred tax liabilities of $50 million and recognized tax expense of $80 million. The company is subject to a tax rate of 25%. The change in deferred tax assets (ignoring any valuation allowance) was a/an:

 

 

Under its executive stock option plan, N Corporation granted options on January 1, 2021, that permit executives to purchase 15.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $17 per share. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives? (Round your answer to 1 decimal place.)

 

FX Services granted 18.5 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. The common shares have a market price of $7 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives? (Round your answer to 1 decimal place.)

 

Lance Chips granted restricted stock units (RSUs) representing 56 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $5 per share on the grant date. The total compensation cost pertaining to the restricted stock units is:

 

At December 31, 2020 and 2021, Funk & Noble Corporation had outstanding 1,320 million shares of common stock and 21 million shares of 6%, $100 par value cumulative preferred stock. No dividends were declared on either the preferred or common stock in 2020 or 2021. Net income for 2021 was $3,294 million. The income tax rate is 25%.

 

On January 1, 2021, Farmer Fabrication issued stock options for 300,000 shares to a division manager. The options have an estimated fair value of $7 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Farmer Fabrication’s stock price increases by 3% in three years. Farmer initially estimates that it is not probable the goal will be achieved.

 

Under its executive stock option plan, National Corporation granted 22 million options on January 1, 2021, that permit executives to purchase 22 million of the company’s $1 par common shares within the next seven years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $26 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Suppose that the options expire without being exercised.

 

Under its executive stock option plan, National Corporation granted 18 million options on January 1, 2021, that permit executives to purchase 18 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $22 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Suppose that the options are exercised on April 3, 2024, when the market price is $26 per share.

 

Under its executive stock option plan, National Corporation granted 22 million options on January 1, 2021, that permit executives to purchase 22 million of the company’s $1 par common shares within the next seven years, but not before December 31, 2024 (the vesting date). The exercise price is the market price of the shares on the date of grant, $26 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated.

 

First Link Services granted 5.6 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. The common shares have a market price of $14 per share on the grant date of the restricted stock award.

 

Olsson Corporation received a check from its underwriters for $85 million. This was for the issue of one million of its $5 par stock that the underwriters expect to sell for $85 per share.

 

Roberto Corporation was organized on January 1, 2021. The firm was authorized to issue 80,000 shares of $5 par common stock. During 2021, Roberto had the following transactions relating to shareholders' equity:
 
Issued 9,500 shares of common stock at $5.80 per share.
Issued 20,100 shares of common stock at $8.30 per share.
Reported a net income of $105,000.
Paid dividends of $59,000.
Purchased 2,700 shares of treasury stock at $10.30 (part of the 20,100 shares issued at $8.30).

 

REDMOND, Wash.—Nov. 29, 2017 — Giga Tech. on Wednesday announced that its board of directors declared a quarterly dividend of $0.12 per share. The dividend is payable March 8, 2018, to shareholders of record on Feb. 15, 2018. The ex-dividend date will be Feb. 14, 2018.
 
Prepare the journal entries Giga Tech. used to record the declaration and payment of the cash dividend for its 8,900 million shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

The Jennings Group reacquired 4 million of its shares at $80 per share as treasury stock. Last year, for the first time, Jennings sold 3 million treasury shares at $81 per share.
 
If Jennings now sells the remaining 1 million treasury shares at $74 per share, by what amount will retained earnings decline? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

 

Horton Industries’ shareholders’ equity included 290 million shares of $1 par common stock and a balance in paid-in capital - excess of par of $2,900 million.
 
Assuming that Horton retires shares it reacquires (restores their status to that of authorized but unissued shares), by what amount will Horton’s total paid-in capital decline if it reacquires 6 million shares at $9.00 per share? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

 

Penne Pharmaceuticals sold 2 million shares of its $5 par common stock to provide funds for research and development.
 
If the issue price is $16 per share, what is the journal entry to record the sale of the shares? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

Schaeffer Corporation reports $70 million accumulated other comprehensive income in its balance sheet as a component of shareholders’ equity. In a related statement reporting comprehensive income for the year, the company reveals net income of $440 million and other comprehensive income of $19 million.

 

During the current year, Stern Company had pretax accounting income of $41 million. Stern's only temporary difference for the year was rent received for the following year in the amount of $17 million. Stern's taxable income for the year would be:

 

Deferred tax assets and deferred tax liabilities represent the tax effect of the temporary difference between the financial carrying value of an asset or liability and its tax basis.

 

Wayne Co. had a decrease in deferred tax liability of $20 million, a decrease in deferred tax assets of $10 million, and an increase in tax payable of $100 million. The company is subject to a tax rate of 25%. The total income tax expense for the year was:

 

During the current year, Stern Company had pretax accounting income of $40 million. Stern's only temporary difference for the year was rent received for the following year in the amount of $18 million. Stern's taxable income for the year would be:

 

For its first year of operations, Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows:

 

Tringali's tax rate is 25%. Assume that no estimated taxes have been paid.

 

What should Tringali report as its income tax expense for its first year of operations?

 

Assume that Puritan Corp. operates in an industry for which NOL carryback is allowed. Puritan Corp. reported the following pretax accounting income and taxable income for its first three years of operations:

 

Puritan's tax rate is 40% for all years. Puritan elected a loss carryback.

 

As of December 31, 2021. Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback.

 

What did Puritan report on December 31, 2021, as the deferred tax asset for the NOL carryforward?

 

The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars):

 

The applicable tax rate is 25%. There are no other temporary or permanent differences.

 

Franklin's balance sheet at the end of its first year would report:

 

Information for Hobson Corp. for the current year ($ in millions):

 

The applicable enacted tax rate for all periods is 25%.

 

What should Hobson report as net income?

 

Assume that the Kelso Company operates in an industry for which NOL carryback is allowed. The Kelso Company had the following operating results:

 

What is the income tax refund receivable?

 

Schaeffer Corporation reports $60 million accumulated other comprehensive income in its balance sheet as a component of shareholders’ equity. In a related statement reporting comprehensive income for the year, the company reveals net income of $420 million and other comprehensive income of $17 million.

 

What was the balance in accumulated other comprehensive income in last year’s balance sheet? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

 

Penne Pharmaceuticals sold 1 million shares of its $5 par common stock to provide funds for research and development.

 

If the issue price is $15 per share, what is the journal entry to record the sale of the shares? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

Horton Industries’ shareholders’ equity included 300 million shares of $1 par common stock and a balance in paid-in capital - excess of par of $3,000 million.

 

Assuming that Horton retires shares it reacquires (restores their status to that of authorized but unissued shares), by what amount will Horton’s total paid-in capital decline if it reacquires 6 million shares at $9.50 per share? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

 

The Jennings Group reacquired 4 million of its shares at $82 per share as treasury stock. Last year, for the first time, Jennings sold 2 million treasury shares at $83 per share.

 

If Jennings now sells the remaining 2 million treasury shares at $79 per share, by what amount will retained earnings decline? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

 

Following is a recent Giga Tech. press release:

 

REDMOND, Wash.—Nov. 29, 2017 — Giga Tech. on Wednesday announced that its board of directors declared a quarterly dividend of $0.20 per share. The dividend is payable March 8, 2018, to shareholders of record on Feb. 15, 2018. The ex-dividend date will be Feb. 14, 2018.

 

Prepare the journal entries Giga Tech. used to record the declaration and payment of the cash dividend for its 8,800 million shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

Roberto Corporation was organized on January 1, 2021. The firm was authorized to issue 81,000 shares of $5 par common stock. During 2021, Roberto had the following transactions relating to shareholders' equity:

 

Issued 10,600 shares of common stock at $6.00 per share.

 

Issued 20,800 shares of common stock at $8.30 per share.

 

Reported a net income of $100,000.

 

Paid dividends of $42,000.

 

Purchased 2,800 shares of treasury stock at $10.30 (part of the 20,800 shares issued at $8.30).

 

What is total shareholders' equity at the end of 2021?

 

Olsson Corporation received a check from its underwriters for $86 million. This was for the issue of one million of its $5 par stock that the underwriters expect to sell for $86 per share.

 

Which is the correct entry to record the issue of the stock?

 

Tim Howard Gloves issued 5.00% bonds with a face amount of $25 million, together with 6 million shares of its $1 par common stock, for a combined cash amount of $46 million. The fair value of Howard's stock cannot be determined. The bonds would have sold for $19 million if issued separately. For this transaction, Howard should record paid-in capital—excess of par in the amount of:

 

The following partial information is taken from the comparative balance sheet of Levi Corporation:

 

How many of Levi's common shares were outstanding on 12/31/2020?

 

First Link Services granted 5.8 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within five years. The common shares have a market price of $20 per share on the grant date of the restricted stock award.

 

1. Ignoring taxes, what is the total compensation cost pertaining to the restricted shares?

 

2. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?

 

Under its executive stock option plan, National Corporation granted 15 million options on January 1, 2021, that permit executives to purchase 15 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $19 per share. The fair value of the options, estimated by an appropriate option pricing model, is $3 per option. No forfeitures are anticipated.

 

1. Ignoring taxes, what is the total compensation cost pertaining to the stock options?

 

2. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives?

 

Under its executive stock option plan, National Corporation granted 20 million options on January 1, 2021, that permit executives to purchase 20 million of the company’s $1 par common shares within the next six years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $23 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. Suppose that the options are exercised on April 3, 2024, when the market price is $25 per share.

 

Ignoring taxes, what journal entry will National record? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

Under its executive stock option plan, National Corporation granted 16 million options on January 1, 2021, that permit executives to purchase 16 million of the company’s $1 par common shares within the next seven years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $20 per share. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. Suppose that the options expire without being exercised.

 

Ignoring taxes, what journal entry will National record? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

 

On January 1, 2021, Farmer Fabrication issued stock options for 120,000 shares to a division manager. The options have an estimated fair value of $4 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Farmer Fabrication’s stock price increases by 2% in three years. Farmer initially estimates that it is not probable the goal will be achieved.

 

How much compensation will be recorded in 2021, 2022, and 2023?

 

At December 31, 2020 and 2021, Funk & Noble Corporation had outstanding 760 million shares of common stock and 7 million shares of 4%, $100 par value cumulative preferred stock. No dividends were declared on either the preferred or common stock in 2020 or 2021. Net income for 2021 was $788 million. The income tax rate is 25%.

 

Calculate earnings per share for the year ended December 31, 2021. (Round your answer to 2 decimal places.)

 

Lance Chips granted restricted stock units (RSUs) representing 60 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $7 per share on the grant date. The total compensation cost pertaining to the restricted stock units is:

 

FX Services granted 16.0 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. The common shares have a market price of $8 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives? (Round your answer to 1 decimal place.)

 

Under its executive stock option plan, N Corporation granted options on January 1, 2021, that permit executives to purchase 11.0 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $17 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures are anticipated. Ignoring taxes, what is the effect on earnings in the year after the options are granted to executives? (Round your answer to 1 decimal place.)