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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

Explain how the conversion feature of convertible debt has a value (a) to the issuer and (b) to the purchaser.

16-18 (L04) (EPS: Simple Capital Structure) Flagstad Inc. presented the following data.

Net income \(2,500,000

Preferred stock: 50,000 shares outstanding,

\)100 par, 8% cumulative, not convertible 5,000,000

Common stock: Shares outstanding 1/1 750,000

Issued for cash, 5/1 300,000

Acquired treasury stock for cash, 8/1 150,000

2-for-1 stock split, 10/1

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Compute earnings per share.

Tomba Corporation had 300,000 shares of common stock outstanding on January 1, 2017. On May 1, Tomba issued 30,000 shares. (a) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued for cash. (b) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued in a stock dividend.

IFRS16-12 Assume the same information in IFRS16-11, except that Angela Corporation converts its convertible bonds on January 1, 2017.

Instructions

(a) Compute the carrying value of the bond payable on January 1, 2017.

(b) Prepare the journal entry to record the conversion on January 1, 2017.

(c) Assume that the bonds were repurchased on January 1, 2017, for \(1,940,000 cash instead of being converted. The net present value of the liability component of the convertible bonds on January 1, 2017, is \)1,900,000. Prepare the journal entry to record the repurchase on January 1, 2017.

(EPS: Simple Capital Structure) On January 1, 2017, Lennon Industries had stock outstanding as follows.

6% Cumulative preferred stock, \(100 par value,

issued and outstanding 10,000 shares \)1,000,000

Common stock, \(10 par value, issued and

outstanding 200,000 shares 2,000,000

To acquire the net assets of three smaller companies, Lennon authorized the issuance of an additional 160,000 common shares. The acquisitions took place as shown below.

Date of Acquisition Shares Issued

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Company B July 1, 2017 80,000

Company C October 1, 2017 30,000

On May 14, 2017, Lennon realized a \)90,000 (before taxes) gain on discontinued operations.On December 31, 2017, Lennon recorded income of $300,000 from continuing operations.

Instructions

Assuming a 50% tax rate, compute the earnings per share data that should appear on the financial statements of Lennon Industries as of December 31, 2017.
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