|ACCOUNTING 19 Homework Questio value 10.00 points Second Link Services granted

Question

|ACCOUNTING 19 Homework Questio value 10.00 points Second Link Services granted restncted stock unvits (RSUs) representing 14 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated ithin four years After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $30 per share on the grant date 1. Ignoring taxes, what is the total compensation cost pertaining to the restricted stock units? (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).) million 2. Ignoning taxes, what is the effect on eanings in the year after the RSUs are granted to executives? Enter your answer in millions rounded to 1 decimal place (i.., 5,500,000 should be entered as 5.5) million References eBook & Dinculty: 1 Easy

Explanation / Answer

Solution:

Part 1 –

Total compensation cost = Number of Share Option granted x Fair Value or Market Price per option on the grant date

= 14 million x $30

= $420 million

Total Compensation Cost = $420 million

Part 2 –

The $420 million total compensation is expensed equally over the 4 years vesting period, reducing earnings by $105 million (420/4) each year.

Hence,

Effect on earnings decreased by $105 million

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.