Exercise 19–2
Requirement 1
Requirement 2
no entry
Requirement 3
($ in millions)
Requirement 5
Requirement 6
Exercise 19–3
Requirement 1
The $2,588 million total compensation is expensed over the four-year vesting
period, $647 million each year. During 2015, the expense for RSUs granted is the
Requirement 2
($ in millions)
Paid-in capital—restricted stock
Note: The market price at exercise is irrelevant to the accounting (but certainly not to the
recipients).
Exercise 19–4
Requirement 1
Requirement 2
Requirement 3
($ in millions)
Requirement 4
$22.50 fair value per share
Exercise 19–5
Requirement 1
At January 1, 2018, the estimated value of the award is:
$12 estimated fair value per option
($ in
millions)
Requirement 2
We adjust the cumulative amount of compensation expense recorded to
date in the year a forfeiture occurs.
2019
Requirement 3
2020
Note: As a practical expedient, companies can elect to account for forfeitures of
stock options or restricted stock when they occur rather than estimating
them. So rather than reduce in advance the amount to be recorded as
compensation expense and paid-in capital, companies choosing this
approach reduce those same accounts only if and when a forfeiture occurs.
This election only applies to forfeitures related to turnover. For
All of the 3-year vesting
period has passed
Exercise 19–6
Requirement 1
Requirement 2
Requirement 3
($ in millions)
Requirement 4
Exercise 19–7
Requirement 1
At January 1, 2018, the estimated value of the award is:
Requirement 2
($ in
millions)
Requirement 3
Adams-Meneke should adjust the cumulative amount of compensation
expense recorded to date in the year the estimate changes.
2019
2020
Note that this approach is contrary to the usual way companies account for
changes in estimates. For instance, assume a company acquires a three-year
depreciable asset having no estimated residual value. The $75 million
2 years of the 3-year vesting
period have passed
All of the 3-year vesting
period has passed
Exercise 19–8
Requirement 1
At January 1, 2018, the estimated value of the award is:
Requirement 2
($ in millions)
Requirement 3
Requirement 4
Cash ($8 exercise price x 30 million shares)…………………… 240
Note: The market price at exercise is irrelevant.
Requirement 5
Requirement 2
December 31, 2018, 2019, 2020
($ in millions)
Requirement 3
Cash ($11 exercise price x 12 million shares)………………….. 132
Note: The market price at exercise is irrelevant.
Exercise 19–10
Tesla’s disclosure notes for the year ending December 31,
2015, included the following:
Employee Stock Purchase Plan
Employees are eligible to purchase common stock through payroll deductions of up to 15%
of their eligible compensation, subject to any plan limitations. The purchase price of the shares
on each purchase date is equal to 85% of the lower of the fair market value of our common stock
Employee share purchase plans allow employees to buy company stock under
convenient or favorable terms. Most such plans are considered compensatory and
($ in millions)
Cash (aggregate proceeds)31.9
Exercise 19–11
(amounts in thousands, except per share amount)
net Earnings
income Per Share
shares new new
at Jan. 1 shares shares
___ stock dividend ___
adjustment
* Employees pay 85% of the stock’s value; the 15% difference is compensation
expense
Exercise 19–12