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Chapter 16: Q8BE. (page 875)

On January 1, 2017 (the date of grant), Lutz Corporation issues 2,000 shares of restricted stock to its executives. The fair value of these shares is \(75,000, and their par value is \)10,000. The stock is forfeited if the executives do not complete 3 years of employment with the company. Prepare the journal entry (if any) on January 1, 2017, and on December 31, 2017, assuming the service period is 3 years.

Short Answer

Expert verified

Unearned compensation will be debited with $75,000, Common Stock will be credited with $10,000, and Paid-in Capital in Excess of Par鈥擟ommon will be credited with $65,000.Compensation Expenses will be debited with $25,000 and Stock Unearned Compensation with $25,000.

Step by step solution

01

The information given in the question is as follows:

Restricted stock 2000 shares

Fair value $75,000

Par value $10,000

Unearned Compensation $25,000 ($75,000 梅 3)

02

Journal entry

Date

Description

DEBIT

CREDIT

1/1/17

Unearned Compensation

$75,000

Common Stock

$10,000

Paid-in Capital in Excess of Par鈥擟ommon Stock

$65,000

Being issue 2000 shares

12/31/17

Compensation Expense

$25,000

Unearned Compensation

$25,000

Being shares are forfeited

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Most popular questions from this chapter

What type of earnings per share presentation is required in a complex capital structure?

E16-28 (L05) (EPS with Warrants) Howat Corporation earned \(360,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of \)15 per share during the period. Also outstanding were 15,000 warrants that could be exercised to purchase one share of common stock for $10 for each warrantexercised.

Instructions

(a) Are the warrants dilutive?

(b) Compute basic earnings per share.

(c) Compute diluted earnings per share.

(L04) (EPS: Simple Capital Structure) Ace Company had 200,000 shares of common stock outstanding on December 31, 2018. During the year 2019, the company issued 8,000 shares on May 1 and retired 14,000 shares on October 31. For the year 2019, Ace Company reported net income of \(249,690 after a loss from discontinued operations of \)40,600 (net of tax).

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What earnings per share data should be reported at the bottom of its income statement?

(Weighted-Average Number of Shares) Newton Inc. uses a calendar year for financial reporting. The company is authorized to issue 9,000,000 shares of $10 par common stock. At no time has Newton issued any potentially dilutive securities. Listed below is a summary of Newton鈥檚 common stock activities.

1. Number of common shares issued and outstanding at December 31, 2015 2,000,000

2. Shares issued as a result of a 10% stock dividend on September 30, 2016 200,000

3. Shares issued for cash on March 31, 2017 2,000,000Number of common shares issued and outstanding at December 31, 2017 4,200,000

4. A 2-for-1 stock split of Newton鈥檚 common stock took place on March 31, 2018

Instructions

(a) Compute the weighted-average number of common shares used in computing earnings per common share for 2016 on the 2017 comparative income statement.

(b) Compute the weighted-average number of common shares used in computing earnings per common share for 2017 on the 2017 comparative income statement.

(c) Compute the weighted-average number of common shares to be used in computing earnings per common share for 2017 on the 2018 comparative income statement.

(d) Compute the weighted-average number of common shares to be used in computing earnings per common share for 2018 on the 2018 comparative income statement

Explain how convertible securities are determined to be potentially dilutive common shares and how those convertible securities that are not considered to be potentially dilutive common shares enter into the determination of earnings per share data.
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