Question
In: Accounting
Begining of year 1 A company issued 6,000 restricted share units and 10,000 stock options to...
Begining of year 1
A company issued 6,000 restricted share units and 10,000 stock options to employees. The shares are currently trading for $10 per share. The option exercise price is set equal to $10 and the fair value of each option is $3. The vesting service period for the restricted share units and stock options is 18 months.
Other information: The firm expects all of the employees receiving restricted share units and stock options will remain for the 18 month required service period.
At the end of year 2 employees exercised all of their 10,000 options. The fair value of the firm’s stock on this date is $19 per share. The firm’s stock had a value of $13 per share on June 30 of Year 2 when the restricted stock units and the stock options vested.
The firm receives a deduction equal to the employee’s gain on the exercise of the option when the option is exercised and a deduction for value of restricted share units when the restrictions elapse.
Pre tax accounting income year 1: $900,000
Pre tax accounting income year 2: $1,200,000
Tax rate 30%.
Please find the taxable income, deferred tax asset and libility for year 1 and 2.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Begining of year 1 Issued 6,000 restricted share units and 10,000 stock options to employees. The...
Begining of year 1
Issued 6,000 restricted share units and 10,000 stock options to
employees. The shares are currently trading for $10 per share. The
option exercise price is set equal to $10 and the fair value of
each option is $3. The vesting service period for the restricted
share units and stock options is 18 months.
Other information Given: At the end of year 2 employees
exercised all of their 10,000 options. The fair value of the firm’s
stock...
Begining of year 1 Issued 6,000 restricted share units and 10,000 stock options to employees. The...
Begining of year 1
Issued 6,000 restricted share units and 10,000 stock options to
employees. The shares are currently trading for $10 per share. The
option exercise price is set equal to $10 and the fair value of
each option is $3. The vesting service period for the restricted
share units and stock options is 18 months.
Other information: The firm expects all of the employees
receiving restricted share units and stock options will remain for
the 18 month required...
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Knowledge Check 01
At January 1, Year 1, Edwards Company issued 10,000 stock options
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Date
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$12
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On January 1, Year 1, LL Company issued 100 stock options with an exercise price of...
On January 1, Year 1, LL Company issued 100 stock options with
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