Reference no: EM133227806

Case: Rice Corporation has a stock purchase plan with the following provision. Each full-time employee with a minimum of one year's service may acquire from Rice Corporation, its common stock, $10 par, through payroll deductions at 5% below the market price on the date selected by the employee for a stock purchase (the exercise date). The exercise decision must be made within one year from the payroll deduction date.

Employee Adams signed a payroll deduction agreement on January 1 for $60 per month. At that date, the market price of the stock was $27 per share. At the end of the year, Adams requested that stock be purchased equal to the amount Adams accumulated as a deposit. At that date, the market price of the stock was $25 per share. Employees cannot purchase partial shares of stock.

Required

Prepare the journal entry on December 31 for the issuance of shares to Adams. Hint: The company credited Liability-Employee Stock Purchase Plan at the time of each payroll deduction.

Note: The employee cannot purchase partial shares of stock.