Stock Awards

Question 1

What account is credited when gross method is used to record compensation expense for a stock award?

Answer 1

Deferred compensation expense

Question 2

What account is credited when net method is used to record compensation expense for a stock award?

Answer 2

Paid in capital from stock award

Question 3

Describe the accounting treatment of forfeitures of stock awards not previously estimated

Answer 3

Reversal of previously recognized compensation expense.

Question 4

What total amount of compensation expense is associated with a stock award plan?

Answer 4

The number of shares awarded measured at the market price of the stock at grant date, recognized as expense over period the employee provides the service for which the grant was awarded.

Question 5

Define “stock award plans”

Answer 5

Plans awarded for continuing employment, but the employee cannot sell the stock (the main restriction) until the award is vestedand the employee may not receive the shares until vested

Question 6

What is the classification of the deferred compensation expense account?

Answer 6

The classification is Contra owners’ equity

Question 7

List the two methods of recording compensation expense for stock awards

Answer 7

Gross method;

Net method

Question 8

What are the disclosures required for share-based stock comp plans?

Answer 8

1. ) Nature and term of plan
2. ) Effect of comp cost on I/S
3. ) Cash flow resulting from plan
4. ) Number of shares under option
5. ) Options exercised and forfeited
6. ) Average option price
7. ) Average FV of options granted
8. ) Average remaining contractual life options
9. ) Method used to estimate FV and significant assumptions used

Question 9

Do changes in stock price after the grant date of stock awards have any effect on accounting?

Answer 9

No, no effect