Compensation and Accrued Payroll - CPA Financial Accounting and Reporting (FAR)
Card 1 of 72
On January 2, Year 1, The Ludlow Corporation grants its president the rights to receive cash equal to the increase in market price of the company's stock for 1000 shares of stock. The market price on that date is $27 per share and that price rises to $30 per share on December 31, Year 1. At December 31, Year 2, the market price is $50 per share. The president must work for 3 years to earn these rights. The rights are valued at $5 per share on January 2, Year 1, at $6 per share on December 31, Year 1, and at $12 per share at December 31, Year 2. What amount of expense should the company recognize in Year 2?
On January 2, Year 1, The Ludlow Corporation grants its president the rights to receive cash equal to the increase in market price of the company's stock for 1000 shares of stock. The market price on that date is $27 per share and that price rises to $30 per share on December 31, Year 1. At December 31, Year 2, the market price is $50 per share. The president must work for 3 years to earn these rights. The rights are valued at $5 per share on January 2, Year 1, at $6 per share on December 31, Year 1, and at $12 per share at December 31, Year 2. What amount of expense should the company recognize in Year 2?
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At December 31, Year 1, the company has expensed $2K for these rights (1K shares x valuation of $6 per share / 3 years). At December 31, Year 2, the value of the rights has risen to $12 per share, so the company must true up their total cost up to that time. The total cost at the end of Year 2 should be $8K (1K shares x $12 per share x 2/3 years). The company must record an additional $6K in Year 2 to get to the correct balance
At December 31, Year 1, the company has expensed $2K for these rights (1K shares x valuation of $6 per share / 3 years). At December 31, Year 2, the value of the rights has risen to $12 per share, so the company must true up their total cost up to that time. The total cost at the end of Year 2 should be $8K (1K shares x $12 per share x 2/3 years). The company must record an additional $6K in Year 2 to get to the correct balance
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On August 1, Year 1, the Webber Company issued stock options to all of its employees. A total of 50,000 options were distributed equally among its employees. On the date of issuance each option was priced at $2.25 and the employees were given until the end of August to convert their options. The option price was set at $63 and the market price on the date of issues was $66. All options were converted by August 31 when the market price of the stock was $68. What amount of expense should the Webber Company recognize in Year 1?
On August 1, Year 1, the Webber Company issued stock options to all of its employees. A total of 50,000 options were distributed equally among its employees. On the date of issuance each option was priced at $2.25 and the employees were given until the end of August to convert their options. The option price was set at $63 and the market price on the date of issues was $66. All options were converted by August 31 when the market price of the stock was $68. What amount of expense should the Webber Company recognize in Year 1?
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The expense recorded is $0 because the stock options meet the requirements for being non-compensatory (that is, all employees are included equally, the discount on shares was very small, and employees only had 1 month to convert).
The expense recorded is $0 because the stock options meet the requirements for being non-compensatory (that is, all employees are included equally, the discount on shares was very small, and employees only had 1 month to convert).
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On January 2, Year 3, the Beans Company gives its CEO 1,500 options to buy stock in the company. The market price per share on that date is $25 and the option price is $22. The price increases to $29 per share on December 31, Year 3, and to $30 per share on December 31, Year 4. A computer pricing model values each option at $4 on the date of the grant, at $5 on December 31, Year 3, and at $7 on December 31, Year 4. The CEO must work for three years in order to earn these options and then has one additional year to exercise them. What amount of expense should Beans Company recognize in Year 4 related to these stock options?
On January 2, Year 3, the Beans Company gives its CEO 1,500 options to buy stock in the company. The market price per share on that date is $25 and the option price is $22. The price increases to $29 per share on December 31, Year 3, and to $30 per share on December 31, Year 4. A computer pricing model values each option at $4 on the date of the grant, at $5 on December 31, Year 3, and at $7 on December 31, Year 4. The CEO must work for three years in order to earn these options and then has one additional year to exercise them. What amount of expense should Beans Company recognize in Year 4 related to these stock options?
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For compensatory stock options, the expense is determined at the grant date only and is amortized over the vesting period. The expense for Year 4 is calculated as $4 per share x 1,500 shares / 3 years.
For compensatory stock options, the expense is determined at the grant date only and is amortized over the vesting period. The expense for Year 4 is calculated as $4 per share x 1,500 shares / 3 years.
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Any post retirement health benefits are accrued in a manner similar to pension benefits. The expected postretirement health benefits must be fully accrued by the date the employee is fully eligible for the benefits. The accrual will begin when the employee is hired through the eligibility date.
Any post retirement health benefits are accrued in a manner similar to pension benefits. The expected postretirement health benefits must be fully accrued by the date the employee is fully eligible for the benefits. The accrual will begin when the employee is hired through the eligibility date.
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The employer's obligation for postretirement health benefits that are expected to be provided to or for an employee must be fully accrued by the date the:
The employer's obligation for postretirement health benefits that are expected to be provided to or for an employee must be fully accrued by the date the:
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Overfunded pension plans, which have a great asset count than liability, are reported as a noncurrent asset for balance sheet reporting purposes.
Overfunded pension plans, which have a great asset count than liability, are reported as a noncurrent asset for balance sheet reporting purposes.
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An overfunded single employer defined benefit postretirement plan should be recognized in a classified statement of financial position as a:
An overfunded single employer defined benefit postretirement plan should be recognized in a classified statement of financial position as a:
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On which date would a public entity be required to measure the cost of employee services in exchange for an award of equity interests based on the FMV of the award?
On which date would a public entity be required to measure the cost of employee services in exchange for an award of equity interests based on the FMV of the award?
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Equity instruments are to be valued at grant date when they are issued for employee services.
Equity instruments are to be valued at grant date when they are issued for employee services.
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A company has a defined benefit plan in operation that covers six employees who have an average of 5 years left to work. On January 1, Year 5, the company amends the plan and this amendment results in an increase in the pension benefit obligation of $350,000. Also in Year 5, the plan's actuary updates the plan's assumptions, which increases the pension benefit obligation by $220,000. What amount is reported in accumulated other comprehensive income related to the defined benefit plan at the end of Year 5?
A company has a defined benefit plan in operation that covers six employees who have an average of 5 years left to work. On January 1, Year 5, the company amends the plan and this amendment results in an increase in the pension benefit obligation of $350,000. Also in Year 5, the plan's actuary updates the plan's assumptions, which increases the pension benefit obligation by $220,000. What amount is reported in accumulated other comprehensive income related to the defined benefit plan at the end of Year 5?
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The amount reported in AOCI is the amount of these changes that has not yet been amortized. For the plan amendment, amortization begins in the current year over the 5 years the employees plan to continue working ($350K / 5 years = $70K). Therefore, $280K remains in AOCI. For the changes in assumptions, amortization will not begin until the following year, so $220K remains in AOCI.
The amount reported in AOCI is the amount of these changes that has not yet been amortized. For the plan amendment, amortization begins in the current year over the 5 years the employees plan to continue working ($350K / 5 years = $70K). Therefore, $280K remains in AOCI. For the changes in assumptions, amortization will not begin until the following year, so $220K remains in AOCI.
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A company starts a defined benefit pension plan on January 1, Year 1. The service cost for the year is $250,000 and plan funding each year is $175,000 (made each January 1). Interest on the projected benefit obligation is 8% while the expected return on plan assets is 10%. How much is pension expense in Year 2?
A company starts a defined benefit pension plan on January 1, Year 1. The service cost for the year is $250,000 and plan funding each year is $175,000 (made each January 1). Interest on the projected benefit obligation is 8% while the expected return on plan assets is 10%. How much is pension expense in Year 2?
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Pension service cost is recorded at the end of each Year, with the PBO determined at that time. PBO at the end of Year 1 is equal to $250K. Plan assets at the end of Year 1 are equal to the $175K deposited in January plus the assets earnings over Year 1 of $17,500 ($175K x 10%). Pension expense in Year 2 is equal to $250K service cost + $20K ($250K PBO x 8%) - $36,750K ($367,500 x 10%)
Pension service cost is recorded at the end of each Year, with the PBO determined at that time. PBO at the end of Year 1 is equal to $250K. Plan assets at the end of Year 1 are equal to the $175K deposited in January plus the assets earnings over Year 1 of $17,500 ($175K x 10%). Pension expense in Year 2 is equal to $250K service cost + $20K ($250K PBO x 8%) - $36,750K ($367,500 x 10%)
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The Capstone Company has a defined benefit pension plan. On January 1, Year 12, the plan is amended, causing the projected benefit obligation to increase by $600,000. At that time, the covered employees are expected to work another 8 years on average. How will this amendment be reported in the Year 12 financial statements?
The Capstone Company has a defined benefit pension plan. On January 1, Year 12, the plan is amended, causing the projected benefit obligation to increase by $600,000. At that time, the covered employees are expected to work another 8 years on average. How will this amendment be reported in the Year 12 financial statements?
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Changes in pension plans and assumptions are initially reported in AOCI, and then amortized to pension expense. The company will expense $75K of this amendment ($600K / 8 years) and leave the remaining $525K in AOCI.
Changes in pension plans and assumptions are initially reported in AOCI, and then amortized to pension expense. The company will expense $75K of this amendment ($600K / 8 years) and leave the remaining $525K in AOCI.
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Investments must be reported at fair value in the financial statements of pension plans and trusts.
Investments must be reported at fair value in the financial statements of pension plans and trusts.
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In the financial statements of employee benefit pension plans, the plan investments are reported at which valuation?
In the financial statements of employee benefit pension plans, the plan investments are reported at which valuation?
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The differences between executive and nonexecutive plans is not a disclosure that is required.
The differences between executive and nonexecutive plans is not a disclosure that is required.
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Footnote disclosures in the financial statements for pensions do not require inclusion of which of the following?
Footnote disclosures in the financial statements for pensions do not require inclusion of which of the following?
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The net periodic pension cost for the year of a defined benefit pension plan would be reported on:
The net periodic pension cost for the year of a defined benefit pension plan would be reported on:
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A company would only report the net periodic pension cost on the income statement.
A company would only report the net periodic pension cost on the income statement.
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A company has a defined benefit plan in operation that covers six employees who have an average of 5 years left to work. On January 1, Year 5, the company amends the plan and this amendment results in an increase in the pension benefit obligation of $350,000. Also in Year 5, the plan's actuary updates the plan's assumptions, which increases the pension benefit obligation by $220,000. What amount is reported in accumulated other comprehensive income related to the defined benefit plan at the end of Year 5?
A company has a defined benefit plan in operation that covers six employees who have an average of 5 years left to work. On January 1, Year 5, the company amends the plan and this amendment results in an increase in the pension benefit obligation of $350,000. Also in Year 5, the plan's actuary updates the plan's assumptions, which increases the pension benefit obligation by $220,000. What amount is reported in accumulated other comprehensive income related to the defined benefit plan at the end of Year 5?
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The amount reported in AOCI is the amount of these changes that has not yet been amortized. For the plan amendment, amortization begins in the current year over the 5 years the employees plan to continue working ($350K / 5 years = $70K). Therefore, $280K remains in AOCI. For the changes in assumptions, amortization will not begin until the following year, so $220K remains in AOCI.
The amount reported in AOCI is the amount of these changes that has not yet been amortized. For the plan amendment, amortization begins in the current year over the 5 years the employees plan to continue working ($350K / 5 years = $70K). Therefore, $280K remains in AOCI. For the changes in assumptions, amortization will not begin until the following year, so $220K remains in AOCI.
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A company starts a defined benefit pension plan on January 1, Year 1. The service cost for the year is $250,000 and plan funding each year is $175,000 (made each January 1). Interest on the projected benefit obligation is 8% while the expected return on plan assets is 10%. How much is pension expense in Year 2?
A company starts a defined benefit pension plan on January 1, Year 1. The service cost for the year is $250,000 and plan funding each year is $175,000 (made each January 1). Interest on the projected benefit obligation is 8% while the expected return on plan assets is 10%. How much is pension expense in Year 2?
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Pension service cost is recorded at the end of each Year, with the PBO determined at that time. PBO at the end of Year 1 is equal to $250K. Plan assets at the end of Year 1 are equal to the $175K deposited in January plus the assets earnings over Year 1 of $17,500 ($175K x 10%). Pension expense in Year 2 is equal to $250K service cost + $20K ($250K PBO x 8%) - $36,750K ($367,500 x 10%)
Pension service cost is recorded at the end of each Year, with the PBO determined at that time. PBO at the end of Year 1 is equal to $250K. Plan assets at the end of Year 1 are equal to the $175K deposited in January plus the assets earnings over Year 1 of $17,500 ($175K x 10%). Pension expense in Year 2 is equal to $250K service cost + $20K ($250K PBO x 8%) - $36,750K ($367,500 x 10%)
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The Capstone Company has a defined benefit pension plan. On January 1, Year 12, the plan is amended, causing the projected benefit obligation to increase by $600,000. At that time, the covered employees are expected to work another 8 years on average. How will this amendment be reported in the Year 12 financial statements?
The Capstone Company has a defined benefit pension plan. On January 1, Year 12, the plan is amended, causing the projected benefit obligation to increase by $600,000. At that time, the covered employees are expected to work another 8 years on average. How will this amendment be reported in the Year 12 financial statements?
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Changes in pension plans and assumptions are initially reported in AOCI, and then amortized to pension expense. The company will expense $75K of this amendment ($600K / 8 years) and leave the remaining $525K in AOCI.
Changes in pension plans and assumptions are initially reported in AOCI, and then amortized to pension expense. The company will expense $75K of this amendment ($600K / 8 years) and leave the remaining $525K in AOCI.
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Investments must be reported at fair value in the financial statements of pension plans and trusts.
Investments must be reported at fair value in the financial statements of pension plans and trusts.
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In the financial statements of employee benefit pension plans, the plan investments are reported at which valuation?
In the financial statements of employee benefit pension plans, the plan investments are reported at which valuation?
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The differences between executive and nonexecutive plans is not a disclosure that is required.
The differences between executive and nonexecutive plans is not a disclosure that is required.
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Footnote disclosures in the financial statements for pensions do not require inclusion of which of the following?
Footnote disclosures in the financial statements for pensions do not require inclusion of which of the following?
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The net periodic pension cost for the year of a defined benefit pension plan would be reported on:
The net periodic pension cost for the year of a defined benefit pension plan would be reported on:
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A company would only report the net periodic pension cost on the income statement.
A company would only report the net periodic pension cost on the income statement.
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On January 2, Year 1, The Ludlow Corporation grants its president the rights to receive cash equal to the increase in market price of the company's stock for 1000 shares of stock. The market price on that date is $27 per share and that price rises to $30 per share on December 31, Year 1. At December 31, Year 2, the market price is $50 per share. The president must work for 3 years to earn these rights. The rights are valued at $5 per share on January 2, Year 1, at $6 per share on December 31, Year 1, and at $12 per share at December 31, Year 2. What amount of expense should the company recognize in Year 2?
On January 2, Year 1, The Ludlow Corporation grants its president the rights to receive cash equal to the increase in market price of the company's stock for 1000 shares of stock. The market price on that date is $27 per share and that price rises to $30 per share on December 31, Year 1. At December 31, Year 2, the market price is $50 per share. The president must work for 3 years to earn these rights. The rights are valued at $5 per share on January 2, Year 1, at $6 per share on December 31, Year 1, and at $12 per share at December 31, Year 2. What amount of expense should the company recognize in Year 2?
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At December 31, Year 1, the company has expensed $2K for these rights (1K shares x valuation of $6 per share / 3 years). At December 31, Year 2, the value of the rights has risen to $12 per share, so the company must true up their total cost up to that time. The total cost at the end of Year 2 should be $8K (1K shares x $12 per share x 2/3 years). The company must record an additional $6K in Year 2 to get to the correct balance
At December 31, Year 1, the company has expensed $2K for these rights (1K shares x valuation of $6 per share / 3 years). At December 31, Year 2, the value of the rights has risen to $12 per share, so the company must true up their total cost up to that time. The total cost at the end of Year 2 should be $8K (1K shares x $12 per share x 2/3 years). The company must record an additional $6K in Year 2 to get to the correct balance
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On August 1, Year 1, the Webber Company issued stock options to all of its employees. A total of 50,000 options were distributed equally among its employees. On the date of issuance each option was priced at $2.25 and the employees were given until the end of August to convert their options. The option price was set at $63 and the market price on the date of issues was $66. All options were converted by August 31 when the market price of the stock was $68. What amount of expense should the Webber Company recognize in Year 1?
On August 1, Year 1, the Webber Company issued stock options to all of its employees. A total of 50,000 options were distributed equally among its employees. On the date of issuance each option was priced at $2.25 and the employees were given until the end of August to convert their options. The option price was set at $63 and the market price on the date of issues was $66. All options were converted by August 31 when the market price of the stock was $68. What amount of expense should the Webber Company recognize in Year 1?
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The expense recorded is $0 because the stock options meet the requirements for being non-compensatory (that is, all employees are included equally, the discount on shares was very small, and employees only had 1 month to convert).
The expense recorded is $0 because the stock options meet the requirements for being non-compensatory (that is, all employees are included equally, the discount on shares was very small, and employees only had 1 month to convert).
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