【正文】 Liability 20,000 2020 At the end of 2020, the stock price is $57. The new estimation for pensation expense is $70,000 [10,000 ($57 – $50). (continues) Dec. 31 Compensation Expense ($46,667 – $20,000) 26,667 ShareBased Compensation Liability 26,667 2020 1352 Neff Company Example Neff’s stock price is $59 at the end of 2020. Aggregate pensation expense is $90,000 [10,000 ($59 – $50)]. Of this amount, $46,667 has already been recognized. Dec. 31 Compensation Expense ($90,000 ─ $46,667) 43,333 ShareBased Compensation Liability 43,333 2020 (continues) 1353 Neff Company Example By the end of 2020, the price of Neff’s stock is $61. An entry is required to reflect this increase in stock value [10,000 ($61 – $59). Dec. 31 Compensation Expense 20,000 ShareBased Compensation Liability 20,000 2020 Cash payments are made to the holders of the 10,000 SARs on December 31, 2020. Dec. 31 ShareBased Compensation Liability 110,000 Cash [10,000 ($61 – $50)] 110,000 2020 1354 Mandatorily Redeemable Preferred Shares ? Historically, the SEC required that firms not include mandatorily redeemable preferred stock under the Stockholders’ Equity heading. ? Given a “mezzanine” treatment. ? FASB Statement No. 150 requires these items to be reported as liabilities in the balance sheet. 1355 Written Put Options ? A put option is an agreement that allows investors to sell the issuing corporation shares they hold at set prices on specific dates. ? If the stock price stays above a set level per share, the issuing corporation pays nothing. ? Historically recorded as part of equity. (continues) 1356 Written Put Options ? In Statement , the FASB instructs panies to record the fair value of the obligation under written put options on a pany’s own shares as a liability. 1357 Obligation to Issue Shares of a Certain Dollar Value ? Companies occasionally agree to satisfy their obligations by delivering shares of their own stock rather than by paying cash. ? This is especially true for startup panies. ? Can be recorded as equity or as a liability, depending on how the contract is written. 1358 Noncontrolling Interest ? When a parent pany owns less than 100% of the subsidiary’s assets and liabilities, there are minority stockholders. ? Financing provided by minority stockholders is called minority interest. ? Under SFAS No. 160, the FASB uses the term noncontrolling interest. 1359 Stock Conversions On December 31, 2020, 1,000 shares of preferred stock (par $50) are exchanged for 4,000 shares of mon stock (par $1). Case 1 Dec. 31 Preferred Stock, $50 par 50,000 PaidIn Capital in Excess of Par— Preferred 10,000 Common Stock, $1 par 4,000 PaidIn Capital in Excess of Par—Common 56,000 2020 1360 Stock Conversions On December 31, 2020, 1,000 shares of preferred stock (par $50) are exchanged for 4,000 shares of mon stock (par $20). Case 2 Dec. 31 Preferred Stock, $50 par 50,000 PaidIn Capital in Excess of Par— Preferred 10,000 Retained Earnings 20,000 Common Stock, $20 par 80,000 2020 1361 Factors Affecting Retained Earnings 1362 Net Ine and Dividends ? The primary source of retained earnings is the ine generated by a business. ? When operating losses or other debits to Retained Earnings produce a debit balance in the account, the debit balance is referred to as a deficit. ? Use of the term dividends without qualification normally implies the distribution of cash. 1363 PriorPeriod Adjustments In some situations, errors made in past years are discovered and corrected in the current year by an adjustment to Retained Earnings, referred to as a priorperiod adjustment. 1364 Accounting for Dividends In setting dividend policy, the board of directors must answer two questions: 1. Do we have the legal right to declare a dividend? 2. Is a dividend distribution financially advisable? 1365 Accounting for Dividends ? Declaration date—date the corporation’s board of directors formally declares a dividend will be paid ? Date of record—date on which stockholders of record are identified as those who will receive a dividend ? Date of payment—date when the dividend is actually distributed to stockholders 1366 Cash Dividends ABC Corporation declares a $100,000 dividend。 Dec. 31, 2020, $56。131 Intermediate Accounting,17E Stice | Stice | Skousen 169。 the market price on January 1, 2020, is also $50 per share. ? Each option is puted to have a value of $10. (continues) 1345 Accounting for PerformanceBased Plans ? The options vest, or bee exercisable, beginning on January 1, 2020, and only if the employee stays with the pany for the entire 3year period. The options expire on December 31, 2020. ? The number of options granted is contingent on Neff’s level of sales for 2020. If Neff sales are less than $50 million, only 10,000 options will vest. (continues) 1346 Accounting for PerformanceBased Plans ? If Neff’s 2020 sales are between $50 million and $80 million, an additional 2,000 options will vest.