ACTIVITY 3-4 SB COMPENSATION

Theory
Multiple Choice. Select the best answer.

The payment for services in cash and based on the price of the entity's ordinary shares is what type
of share-based payment transaction? *
1 point

Asset-settled share-based payment transaction.

Liability-settled share-based payment transaction.
Cash-settled share-based payment transaction.
Equity-settled share-based payment transaction.

A cash-settled share-based payment transaction increases *

1 point

A current asset
A noncurrent asset
Equity
A liability

Compensation cost for a share-based payment to employees that is classified as liability is

measured at: *
1 point

The change in fair value for each reporting period.

The total fair value at grant date.
The present value of cash payment.
The total cash outlay for the period.

What is the measurement date for share-based payment to employees that is classified as
liability? *
1 point

The service inception date

The grant date
The settlement date
The end of reporting period

For share appreciation rights, the measurement date for computing compensation is the: *
1 point

Date the rights mature

Date the share reaches a predetermined amount
Date of grant
Date of exercise

For transactions with employees, the fair value of the equity instrument granted is measured on? *
1 point

Exercise date
Grant date
End of reporting period
Beginning of the year of grant

It is a contract that gives the holder the right, but not the obligation, to subscribe to the entity's
shares at a fixed or determinable price for a specified period of time. *
1 point

Share option
Share warrant
Share appreciation right
Share split

In what circumstances is compensation expense immediately recognized under a share option

plan? *
1 point

In all circumstances
In circumstances when the options are exercisable within two years for services rendered
In circumstances when the options are immediately exercisable
In no circumstances

Compensation expense from a share option is generally: *

1 point

Recognized in the period of exercise.

Recognized in the period of the grant.
Allocated to the periods benefited by the employee's required service.
Allocated over the periods of the employee's service life to retirement.

If there is an acceleration of vesting, any payment made to the employees on the settlement of the
grant shall be: *
1 point

Accounted for as repurchase of equity interest.

Recognized in retained earnings.
Recognized as other comprehensive income.
Accounted for as repurchase of equity interest and any excess payment over the fair value of share options shall
be recognized as expense.

Problems
Solve the following problems. Show supporting computations. Answers on the space provided must have NO comma and peso
sign.

Under the executive share option plan, Marien Company granted options on January 1, 2020 that
permit executives to purchase 15,000 P100 par ordinary shares within the next eight years but not
before December 31, 2022. *
3 points

180,000

Your answer
On January 1, 2020, Green Company had issued executive share options permitting executives to
buy 40,000 shares for P25 per share. The vesting schedule is 20% the first year, 30% the second
year, and 50% the third year (graded-vesting). Vesting date: December 31, 2020, Amount vesting:
20%, Fair value per option: 10; Vesting date: December 31, 2021, Amount vesting: 30%, Fair value
per option: 15; Vesting date: December 31, 2022, Amount vesting: 50%, Fair value per option: 20.
Assuming the entity used the straight line method, what amount of compensation expense should
be recorded in 2020? *
3 points

220,000

Your answer

Answer the last 3 questions based on given information: On January 1, 2020, Planet Company
purchased an equipment with a cash price of P2,000,000. The supplier can choose how the
purchase is to be settled. The choices are 20,000 shares with par value of P50 in one year's time,
or a cash payment equal to the market value of 15,000 phantom shares on December 31, 2020. At
grant date on January 1, 2020, the market price of each share is P80 and on the date of settlement
on December 31, 2020, the market price of each share is P100. What is the equity component
arising from the purchase of equipment with share and cash alternative? *
3 points

800,000

Your answer

What amount of interest expense should be recognized on December 31, 2020 if the supplier has
chosen the cash alternative? *
3 points

300,000

Your answer

What amount should be recognized as share premium on December 31, 2020 if the supplier has
chosen the share alternative? *

1,000,000