MA.

CRHISTHIEN ARNAN BSA-2 ACC227 E-PORTFOLIO

Chapter 12
Share-based Payments (Part 1)

PROBLEM 1: TRUE OR FALSE

1. TRUE 6. FALSE
2. TRUE 7. FALSE
3. FALSE 8. FALSE
4. TRUE 9. TRUE
5. TRUE 10. TRUE

PROBLEM 2: FOR CLASSROOM DISCUSSION

1. C

2. D

3. C

4. D

5. C

6. A

7. Solution:

January 1, 20X4
Inventory 3,000,000
Share capital 3,000,000

December 31, 20X5

Cash 5,000,000
Sales 5,000,000

Cost of goods sold 3,000,000

Inventory 3,000,000

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8. Solution:
Salaries expense 500,000
Share capital 300,000
Share premium 200,000

9. Solution:

Dec. 31, 20x4

Salaries expense [1,000 x (150 – 100)] 50,000
Share premium – options outstanding 50,000

10. Solutions:

December 31, 20x4:

Salaries expense (6M x 95% x 1/3) 1,900,000
Share premium – options outstanding 1,900,000

December 31, 20x5:

Salaries expense (6M x 94% x 2/3) – 1.9M 1,860,000
Share premium – options outstanding 1,860,000

December 31, 20x6:

Salaries expense [(6M x 95% x 3/3) – 1.9M – 1.86M] 1,940,000
Share premium – options outstanding 1,940,000

11. Solution:

January 1, 20x1:
No entry

December 31, 20x1:

Salaries expense [1,000 x (200 – 8) x 25 x 1/3)] 1,600,000
Share premium – options outstanding 1,600,000

December 31, 20x2:

Salaries expense [1,000 x (200 – 8) x 25 x 2/3)] – 1.6M 1,600,000
Share premium – options outstanding 1,600,000

December 31, 20x3:

Salaries expense 1,550,000
[1,000 x (200 – 6 – 1 - 3) x 25 x 3/3)] – 1.6M – 1.6M
Share premium – options outstanding 1,550,000
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12. Solutions:
December 31, 20x1:
Salaries expense [1,000 x (200 – 8) x 25 x 1/3)] 1,600,000
Share premium – options outstanding 1,600,000

December 31, 20x2:

Salaries expense 3,325,000
[1,000 x (200 – 6 – 1) x 25] – 1.6M
Share premium – options outstanding 3,325,000

PROBLEM 3: EXERCISES

1. Solution:

January 1, 20x1:
Salaries expense (5 x 1,000 x 60) 300,000
Share premium – options outstanding 300,000

2. Solution:

December 31, 20x1

Salaries expense [(10 -1 -1) x 500 x 60 x ½] 120,000
Share premium – options outstanding 120,000

December 31, 20x2

Salaries expense [(10 -1) x 500 x 60 x 2/2] – 120K 150,000
Share premium – options outstanding 150,000

3. Solutions:

December 31, 20x1:

Salaries expense (3.2M x 90% x 1/3) 960,000
Share premium – options outstanding 960,000

December 31, 20x2:

Salaries expense (3.2M x 96% x 2/3) – 960K 1,088,000
Share premium – options outstanding 1,088,000

December 31, 20x3:

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Salaries expense 1,152,000
[(3.2M x 100% x 3/3) – .96M – 1.088M]
Share premium – options outstanding 1,152,000

4. Solution:

January 1, 20x1:
No entry

December 31, 20x1:

Salaries expense [1,000 x (100 – 9*) x 12 x 1/3)] 364,000
Share premium – options outstanding 364,000

December 31, 20x2:

Salaries expense [1,000 x (100 – 8) x 12 x 2/3)] – 364K 372,000
Share premium – options outstanding 372,000

December 31, 20x3:

Salaries expense 356,000
[1,000 x (100 – 6 – 1 - 2) x 12 x 3/3)] – 364K – 372K
Share premium – options outstanding 356,000

5. Solutions:
December 31, 20x1:
Salaries expense [1,000 x (100 – 9*) x 12 x 1/3)] 364,000
Share premium – options outstanding 364,000

December 31, 20x2:

Salaries expense 752,000
[1,000 x (100 – 6 – 1) x 12] – 364K
Share premium – options outstanding 752,000

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PROBLEM 4: CLASSROOM ACTIVITY
1. Solutions:
Salaries expenses are computed as follows:
Dec. Number of share options granted per employee 1,000
31, Multiply by: # of employees expected to remain in service 100
20x Total share options expected to vest 100,000
1 Multiply by: Fair value per share option at grant date 30
Fair value of share options at grant date 3,000,000
Multiply by: Vesting period passed over Total vesting
period 1 yr. /3 yrs.
Cumulative salaries expense to date 1,000,000
Salaries expense recognized in previous periods -
Salaries expense for current year - 20x1 1,000,000

Dec Fair value of share options at grant date

. (100 x 1,000 x 30) 3,000,000
31, Multiply by: Vesting period passed over Total vesting
20x period 2 yrs. /3 yrs.
2 Cumulative salaries expense to date 2,000,000
Salaries expense recognized in previous periods (1,000,00
(1M in 20x1) 0)
Salaries expense for current year - 20x2 1,000,000

Dec Fair value of share options at grant date

. (100 x 1,000 x 30) 3,000,000
31, Multiply by: Vesting period passed over Total vesting
20x period 3 yrs. /3 yrs.
3 Cumulative salaries expense to date 3,000,000
Salaries expense recognized in previous periods
(1M + 1M) (2,000,000)
Salaries expense for current year - 20x3 1, 000,000

The pertinent entries are:

Memo entry
Jan.
(“Granted 1,000 share options to 100 key -
1,
employees on Jan. 1, 20x1. Fair value per share -
20x
option on Jan. 1, 20x1 is P30.”)
1
Dec. Salaries expense – share options 1,000,00
31, [(100 x 1,000 x P30 x 1/3) 0
20x Share premium – share options 1,000,00
1 outstanding 0

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Dec. Salaries expense – share options 1,000,00
31, [(100 x 1,000 x 30 x 2/3) – 1M] 0
20x Share premium – share options 1,000,00
2 outstanding 0
Dec. Salaries expense – share options 1,000,00
31, [(10 x 1,000 x 30 x 3/3) – 2M] 0
20x Share premium – share options 1,000,00
3 outstanding 0

2. Solutions:
Salaries expenses are computed as follows:
Dec Fair value of share options at grant date
. (100 employees - 20) x 1,000 sh. options x P30 per sh.
31, option) 2,400,000
20x Multiply by: Vesting period passed over Total vesting period 1 yr. /3 yrs.
1 Cumulative salaries expense to date 800,000
Salaries expense recognized in previous periods -
Salaries expense for current year - 20x1 800,000

Dec Fair value of share options at grant date

. [(100 – 20) x 1,000 x 30] 2,400,000
31, 2 yrs. /3
20x Multiply by: Vesting period passed over Total vesting period yrs.
2 Cumulative salaries expense to date 1,600,000
Salaries expense recognized in previous periods (800,000)
Salaries expense for current year - 20x2 800,000

De Fair value of share options at grant date

c. [(100 – 20) x 1,000 x 30] 2,400,000
31, Multiply by: Vesting period passed over Total vesting period 3yrs. /3yrs.
20
x3 Cumulative salaries expense to date 2,400,000
Salaries expense recognized in previous periods
(800K + 800K) (1,600,000)
Salaries expense for current year - 20x3 800,000

The pertinent entries are:

Jan.
1, Memo entry
20x1
Dec. Salaries expense – share options 800,000
31, [(100 – 20) x 1,000 x P30 x 1/3]
20x1 Share premium – share options 800,000
outstanding
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Dec. Salaries expense – share options 800,000
31, [(100 – 20) x 1,000 x P30 x 2/3] – 800,000
20x2 Share premium – share options 800,000
outstanding
Dec. Salaries expense – share options 800,000
31, [(100 – 20) x 1,000 x P30 x 3/3] – 1,600,000
20x3 Share premium – share options 800,000
outstanding

3. Solutions:
Salaries expenses are computed as follows:
Dec Fair value of share options at grant date
. (100 employees - 15) x 1,000 sh. options x P30 per option) 2,550,000
31,
20x Multiply by: Vesting period passed over Total vesting
1 period 1/3
Cumulative salaries expense to date 850,000
Salaries expense recognized in previous periods -
Salaries expense for current year - 20x1 850,000

Dec Fair value of share options at grant date 2,640,00

. [(100-12) x 1,000 x 30] 0
31, Multiply by: Vesting period passed over Total vesting period 2/3
20x
2 Cumulative salaries expense to date 1,760,000
Salaries expense recognized in previous periods (850,000)
Salaries expense for current year - 20x2 910,000

De Fair value of share options at grant date

c. [(100-10) x 1,000 x 30] 2,700,000
31, Multiply by: Vesting period passed over Total vesting
20x period 3/3
3 Cumulative salaries expense to date 2,700,000
Salaries expense recognized in previous periods (1,760,000)
Salaries expense for current year - 20x3 940,000

The pertinent entries are:

Jan.
1, Memo entry
20x1
Dec. Salaries expense – share options 850,000
31, [(100 – 15) x 1,000 x P30 x 1/3]
20x1 Share premium – share options 850,000
outstanding
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 Dec. Salaries expense – share options 910,000
31, [(100 – 12) x 1,000 x P30 x 2/3] – 850,000
20x2 Share premium – share options 910,000
outstanding
Dec. Salaries expense – share options 940,000
31, [(100 – 10) x 1,000 x P30 x 3/3] – 1,760,000
20x3 Share premium – share options 940,000
outstanding

4. Solution:
Salaries expenses are computed as follows:

Dec. Fair value of share options at grant date

31, [(100 employees - 20) x 1,000 x P30 per sh. option] 2,400,000
20x1 Multiply by: Vesting period passed over Total vesting
period 1/3
Cumulative salaries expense to date 800,000
Salaries expense recognized in previous periods -
Salaries expense for current year - 20x1 800,000

Dec. Fair value of share options at grant date

31, [(100 - 20) x 1,000 x 30] 2,400,000
20x2 Multiply by: Vesting period passed over Total vesting
period 2/3
Cumulative salaries expense to date 1,600,000
Salaries expense recognized in previous periods (800,000)
Salaries expense for current year - 20x2 800,000

Dec. Fair value of share options at grant date

31, [100 x 1,000 x 30] 3,000,000
20x3 Multiply by: Vesting period passed over Total vesting
period 3/3
Cumulative salaries expense to date 3,000,000
Salaries expense recognized in previous periods (1,600,000)
Salaries expense for current year - 20x3 1,400,000

The pertinent entries are:

Jan.
1, Memo entry
20x1
Dec. Salaries expense – share options 800,000
31, [(100 – 20) x 1,000 x P30 x 1/3]
20x1 Share premium – share options 800,000
outstanding
8
Dec. Salaries expense – share options 800,000
31, [(100 – 20) x 1,000 x P30 x 1/3] – 800,000
20x2 Share premium – share options 800,000
outstanding
Dec. Salaries expense – share options 1,400,00
31, (100 x 1,000 x P30 x 3/3) – 1,600,000 0
20x3 Share premium – share options 1,400,00
outstanding 0

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PROBLEM 5: MULTIPLE CHOICE – THEORY
1. C 6. B
2. C 7. C
3. A 8. C
4. B 9. C
5. C 10. B

PROBLEM 6: MULTIPLE CHOICE – COMPUTATIONAL

1. A
 (140 – 5) x 1,000 = 135,000; The ₱160 per hour billing price is not
deemed the fair value of the legal services received.

2. D
 (1,000 x 7) = 7,000

3. B
 (3,000 shares x ₱8 fair value per option x ½) = 12,000

4. A
 (12,000 x 70%) = 8,400

5. C
 (350,000 employee withholdings x 2) = 700,000 employer’s
contribution

6. C
 (40,000 x 10 x 96% x 1/2) = 192,000

7. A
 45,000 cash contribution + (3,000 x 18) = 99,000

8. B
 60,000 sh. x (32 – 25) x ½ = 210,000

9. A

10. C

 (1,000 x 5 x ₱5 x ¼) = 6,250

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