P19-6 Walters Audio Visual, Inc., offers a stock option plan to its regional managers. On January 1, 2011,

P19-6 Walters Audio Visual, Inc., offers a stock option plan to its regional managers. On January 1, 2011,

P 19-6 Stock option plan; deferred tax effect recognized – EXCEL TEMPLATE

19-6 Walters Audio Visual, Inc., offers a stock option plan to its regional managers. On January 1, 2011, options were granted for 40 million $1 par common shares. The exercise price is the market price on the grant date, $8 per share. Options cannot be exercised prior to January 1, 2013, and expire December 31, 2017. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. Because the plan does not qualify as an incentive plan, Walters will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. The income tax rate is 40%.

 

Required:

1.Determine the total compensation cost pertaining to the stock option plan.

2. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2011.

3. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2012.

4. Record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2016, when the market price is $12 per share.

5. Assume the option plan qualifies as an incentive plan. Prepare the appropriate journal entries to record compensation expense and its tax effect on December 31, 2011.

6. Assuming the option plan qualifies as an incentive plan, record the exercise of the options and their tax effect if all of the options are exercised on March 20, 2016, when the market price is $11 per share.

WALTERS AUDIO VISUAL, INC.

$1 par common share options granted			40,000,000	shares
Exercise price			$           8.00	per share
Fair value			$           2.00	per option
Income tax rate			40%

 

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File name: P19-6-Walters-Audio.xls File type: application/vnd.ms-excel PRICE: $7

P21-5 Comparative balance sheets for 2013 and 2012 and a statement of income for 2013 are given below for Metagrobolize Industries. - EXCEL TEMPLATE

P21-5 Comparative balance sheets for 2013 and 2012 and a statement of income for 2013 are given below for Metagrobolize Industries. - EXCEL TEMPLATE

P21-5 Statement of cash flows; direct method

P21-5 Comparative balance sheets for 2013 and 2012 and a statement of income for 2013 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided.

METAGROBOLIZE INDUSTRIES

Balance Sheet and Income Statement are given in the solution

Additional information:
Equipment cost	$300,000
Depreciated	90%
Stock dividend	$225,000
Cash dividend	$450,000

Additional information from the accounting records:

a. During 2013, equipment with a cost of $300,000 (90% depreciated) was sold.
b. The statement of shareholders' equity reveals reductions of $225,000 and $450,000 for stock dividends and cash dividends, respectively.

Required:

Prepare the statement of cash flows of Metagrobolize for the year ended December 31, 2013. Present cash flows from operating activities by the direct method. (You may omit the schedule to reconcile net income to cash flows from operating activities.)

 

Preview

Metagrobolize Industries

Spreadsheet for the Statement of Cash Flows

	Dec.31 2012	Changes					Dec. 31 2013
		Debits			Credits
Balance Sheet
Assets:
Cash	375		225				600
Accounts receivable	450		150				600
Inventory	525		375				900

File name: P21-5-Metagrobolize.xls File type: application/vnd.ms-excel PRICE: $8

P21-4 The comparative balance sheets for 2013 and 2012 and the statement of income for 2013 are given below for Dux Company. - EXCEL TEMPLATE

P21-4 The comparative balance sheets for 2013 and 2012 and the statement of income for 2013 are given below for Dux Company.

 

P21-4 Statement of cash flows; direct method

 

P21-4 The comparative balance sheets for 2013 and 2012 and the statement of income for 2013 are given below for Dux Company. Additional information from Dux's accounting records is provided also.

 

Additional information from the accounting records:

a. A building that originally cost $40,000, and which was three-fourths depreciated, was sold for $7,000.

b. The common stock of Byrd Corporation was purchased for $5,000 as a long-term investment.

c. Property was acquired by issuing a 13%, seven-year, $30,000 note payable to the seller.

d. New equipment was purchased for $15,000 cash.

e. On January 1, 2011, $25,000 of bonds were sold at face value.

f. On January 19, Dux issued a 5% stock dividend (1,000 shares). The market price of the $10 par value common stock was $14 per share at that time.

g. Cash dividends of $13,000 were paid to shareholders.

h. On November 12, 500 shares of common stock were repurchased as treasury stock at a cost of $8,000.

 

Required:

Prepare the statement of cash flows of Dux Company for the year ended December 31, 2013. Present cash flows from operating activities by the direct method. (You may omit the schedule to reconcile net income to cash flows from operating activities.)

 

DUX COMPANY

Balance Sheet and Income Statement data are given in the solution.

Additional information:
Building cost	$40,000
Building selling price	$7,000
Building depreciated	¾
Common stock purchased as long term investment	5,000
Note payable for property	30,000
Note payable interest	13%
Equipment purchase	15,000
Bond sale, 1/1/13	25,000
Stock dividend issue(1,000 shares)	5%
Common stock par value	10
Market price per share	14
Cash dividends paid	13,000
Number of common stock shares repurchased	500
Common stock repurchase cost	8,000

 
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File name: p21-4-Dux-company.xls File type: application/vnd.ms-excel  Price: $7

P21-2 The comparative balance sheets for 2013 and 2012 and the statement of income for 2013 are given below for Wright Company - EXCEL TEMPLATE

P21-2 The comparative balance sheets for 2013 and 2012 and the statement of income for 2013 are given below for Wright Company

 

P21-2 Statement of cash flows; direct method – EXCEL TEMPLATE

P21-2 The comparative balance sheets for 2013 and 2012 and the statement of income for 2013 are given below for Wright Company. Additional information from Wright's accounting records is provided also.

 

WRIGHT COMPANY

Balance Sheet and Income Statement data are given in the solution.

Additional information:
Original cost	$10,000
Land selling price	7,000
Common stock purchase	25,000
New equipment cost	150,000
Note payment, 1/1/2013	30,000
Bond sale, 1/12013	60,000
Common stock sold	76,000
Common stock par	50,000
Net income	80,000
Cash dividends paid	35,000

 

Additional information from the accounting records:

 

a. Land that originally cost $10,000 was sold for $7,000.

 

b. The common stock of Microsoft Corporation was purchased for $25,000 as a short-term investment not classified as a cash equivalent.

c. New equipment was purchased for $150,000 cash.

d. A $30,000 note was paid at maturity on January 1.

e. On January 1, 2011, $60,000 of bonds were sold at face value.

f. Common stock ($50,000 par) was sold for $76,000.

g. Net income was $80,000 and cash dividends of $35,000 were paid to shareholders.

 

Required:

Prepare the statement of cash flows of Wright Company for the year ended December 31, 2013. Present cash flows from operating activities by the direct method. (You may omit the schedule to reconcile net income to cash flows from operating activities.) 

File name: P21-2-Wright-Company.xls File type: application/vnd.ms-excel Price: $7