Stock Based Compensation

Question: Discuss about the Stock Based Compensation? Answer: 1: Total net income $ in million rate forfeited amount $ in million forfeited expenses 2014 Restricted Stock 10% 25 25% 6.25 26 25% 6.5 27 25% 6.75 28 25% 7 Total 26.5 Forfeited Expense $ 2.65 million The company forfeited 25% every quarter. The forfeited expense rate is 10% per year. So it is calculated 25% of the total amount is forfeited amount and 10% of the forfeited amount is forfeited expense. 2: item Compensation rate Net Compensation Options 75000 20% 60000 2014 Restricted Stock 84000 10% 75600 2015 Restricted Stock 166000 20% 132800 The number of restricted share in 2014 is 84000 and in 2015 are 166000. The forfeited expense rate is 10% and 20% respectively. The total compensation is the difference between total numbers of share forfeited expenses rate. 3: 2014 price per share amount in million $ Number of option stock 75000 12 900000 number of restricted share 84000 12 1008000 Total 1.908 Actual forfeited amount in 2014 2.65 Difference 0.742 4: Journal entry $ amount total number of share 500000 forfeited share 125000 face value 1 application money 0.25 allotment money 0.25 first call money 0.25 final call money 0.25 journal entry Dr. Cr. share capital A/C Dr. 125000 To share allotment A/c 31250 share first call A/C 31250 share final call A/C 31250 Forfeited A/C 31250 share capital A/C Dr. 125000 To share first call A/C 31250 share final call A/C 31250 Forfeited A/C 62500 share capital A/C Dr. 125000 To share final call A/C 31250 Forfeited share A/C 93750 share capital A/C Dr. 125000 To Forfeited A/C 125000 5: item Compensation rate Net Compensation Expense Expected Remaining Options 75,000 20% 60,000 25,000 35,000 19 2014 Restricted Stock 84,000 10% 75,600 50,000 25,600 12 2015 Restricted Stock 1,66,000 20% 1,32,800 80,000 52,800 7 Monthly Janurary15 Feburary15 March15 April -15 May-15 June-15 July-15 1,842 1,842 1,842 1,842 1,842 1,842 1,842 1,842 2,133 2,133 2,133 2,133 2,133 2,133 7,543 7,543 7,543 7,543 7,543 7,543 7,543 7,543 Total 11,518 11,518 11,518 11,518 11,518 9,385 9,385 Total x months until vesting 11,518 23,037 34,555 46,073 57,591 56,310 65,695 Auguest-15 September-15 October-15 November-15 December-15 1,842 1,842 1,842 1,842 1,842 1,842 1,842 1,842 1,842 1,842 14,737 16,579 18,421 20,263 22,105 Total of row 12 3,86,884 Total Expected to be recognized 1,13,400 Weighted-average period 3.41 Years Reference List Kieso, D., Weygandt, J. and Warfield, T. (2012). Intermediate accounting. Hoboken, NJ: Wiley. Libby, R., Libby, P. and Short, D. (2011). Financial accounting. New York: McGraw-Hill/Irwin. Media, B. (2013). CFA Navigator - Level 2 Question Bank. London: BPP Learning Media. North, C. and Caes, C. (2012). The stock market. New York, NY: Rosen Pub