Problem A

(1) 2019
Compensation expense (500 x 100 x 30/ 3 x1st year) 500,000

2020
Cumulative Compensation expense (500-30-30 x 100 x 30/3 x 2nd year) 880,000
Compensation expense-2019 500,000
Compensation Expense-2020 380,000

2021
Cumulative compensation expense (500-30-20 x 100 x 30/3 x 3rd year) 1,350,000
Cumulative expense as of 2020 880,000
Compensation expense- 2021 470,000

Problem B

(2) 2019 Comp exp (30,000 x 30) 900,000/3 x 1 300,000

2020 Comp exp (30,000 x 30) 900,000/3 x 2=600,000-300,000 300,000
2021 Comp exp (30,000 x 25) 750,000/3x 3-600,000 150,000

Problem C

(3) 2019 (50,000 x 24) 1,200,000/3 x 1 400,000

2020 (50,000 x 51) 2,550,000/3 x 2=1,700,000-400,000 1,300,000
2021 (50,000 x 51) 2,550,000-1,700,000 850,000

Problem D

(4) FV of equipment equal to the cash price 2,000,000

FV of liability (15,000 shares x 80) (1,200,000)
Equity component 800,000

Equipment 2,000,000
Accounts Payable 1,200,000
SO Outstanding 800,000

(5) FV of liability (15,000 shares x 100) 1,500,000

FV of liability- Jan 1 (1,200,000)
Implied interest 300,000
 Problem E

(6) Total Compensation 6,000,000

Compensation in 2017 (1,500,000)
Compensation in 2018 (1,300,000)
Compensation in 2019 3,200,000

(7) Cash payment 5,000,000

Compensation in 2017 (1,500,000)
Compensation in 2018 (1,300,000)
Compensation in 2019 2,200,000

Problem F

(8) FV of SO (10,000 x 5 x 50) 2,500,000

Compensation expense for 2019 (2,500,000/4) 625,000

Salaries-SO 625,000
SO Outstanding 625,000

Problem G

(9) 2019 Accrued compensation-12/31/2019 (50,000 x 15) 750,000

Salaries 750,000
Accrued salaries payable 750,000

2020 Accrued compensation- 12/31/2020 (50,000 x 15) 750,000

Accrued compensation-12/31/2019 (750,000)
0

Accrued salaries payable 750,000

Cash 750,000

Problem H

(10) FV of share alternative (25,000 shares x 48) 1,200,000

FV of liability (20,000 shares x 51) 1,020,000
Equity component 180,000

December 31, 2019

 Salaries (180,000/3) 60,000
SO Outstanding 60,000

Salaries 360,000
Accrued salaries payable 360,000

Share basis (20,000 x 54) 1,080,000

Accrued liability-12/31/2019 (1,080,000/3x 1st year) 360,000

Compensation expense to SO 60,000

Compensation expense to cash alternative 360,000
420,000

(11) December 31, 2020

Salaries (180,000/3) 60,000
SO Outstanding 60,000

Salaries 440,000
Accrued salaries payable 440,000

Share basis (20,000 x 60) 1,200,000

Accrued liability (1,200,000 3 x 2) 800,000
Accrued liability -12/31/2019 (360,000)
Compensation expense 2020 440,000

Total compensation expense for 2020 (60k + 440K) 500,000

(12) December 31, 2021

Salaries (180,000/3) 60,000
SO Outstanding 60,000

Salaries 500,000
Accrued salaries payable 500,000

share basis (20,000 x 65) 1,300,000

Total liability-2021 1,300,000
Accrued liability-2020 (800,000)
Compensation for 2021 500,000

Total compensation exp for 2021 (60k + 500k) 560,000

Accrued salaries payable 1,300,000

SO Outstanding 180,000
SC (25,000 x 30) 750,000
SP 730,000

(13) Accrued salaries payable 1,300,000

SO Outstanding 180,000
Cash (20,000 x 65) 1,300,000
SP 180,000