Evaluate the income statement, Financial Management

Assignment Help:

2010 equity balance required:

(600-20 - 25 - 15 - 20)= 520 employees eligible
Total expected equivalent value = 520 x 500 options x $1.48 = $384,800
$384,800 x 3/4 years = $288,600

Previously recognised to 30 September 2009:

(600 - 20 - 25 - 40) = 515 employees eligible
515 employees x 500 options x $1.48 = $381,100
$381,100 x 2/4 years = $190,550

Amount to be documented in the income statement in 2010 = $98,050 ($288,600 - $190,550)

Recorded in 2010 financial statements:

Dr Income statement - staff costs $98,050
Cr Equity - other reserves $98,050

(b)

The sales director is mistaken, regardless of no cash changing hands, the share alternative are issued in exchange for employees providing services to LBP. Perhaps the options have been given as a return for service provided or in lieu of a pay rise or bonus which would or else have been paid in cash. As there is no direct salary cost, we instead must calculate an equal cost of receiving staff services and match this with the income that the staffs helps to generate. We do this by estimating the value intrinsic in the options and assign that over the period in which employees must stay with LBP, in this case 4 years.

The amount paid-for by the office to the income statement is based on the fair value of the share options at the grant date. This is not consequently premeasured as these share options represent an equity-settled share-based payment. The equal cost will be updated each year for those employees that are still eligible or expected to be suitable at the year end to ensure that the amount charged reflects the amount that is expected to vest. 


Related Discussions:- Evaluate the income statement

What is capital recovery, Q. What is Capital recovery? sometimes one ma...

Q. What is Capital recovery? sometimes one may be interested to find out the annual amount paid in the order to redeem a loan of a specific amount over a specific period togeth

Strategic investment and decision-making, Carr, C., Kolehmainen, K. and Mit...

Carr, C., Kolehmainen, K. and Mitchell, F. (2010) ‘Strategic investment decision-making practices: a contextual approach', Management Accounting Research, 21, 167-84. (a) What a

Show the graphic presentation of net income approach, Q. Show the Graphic P...

Q. Show the Graphic Presentation of Net Income Approach? Graphic Presentation of Net Income Approach: - Net Income approach is described graphically as follows: In the

Binomial model, The option features embedded in many bonds and fixed-...

The option features embedded in many bonds and fixed-income securities have made the binomial interest rate tree approach a valuable model for pricing debt. Binomial

Cost of Capital, The Nu-Nu Brothers Inc. (NNBI) has the following capital s...

The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''s expected net income t

Explain traditional method of measurement, Q. Explain Traditional Method of...

Q. Explain Traditional Method of Measurement? Computation of yield to measure a financial asset's return is the simplest and oldest technique of measurement. Yield can be find

What is the maximum additional short-term funding, B.J. Industries has a cu...

B.J. Industries has a current ratio of 2.5, with $2.5 million in current assets.  Due to sales growth, the company wants to expand accounts receivable and inventories by

Why are trend analysis and industry comparison, Why are trend analysis and ...

Why are trend analysis and industry comparison important to financial ratio analysis? Trend analysis assists financial analysts and managers see whether a company's current fin

Need help, #queThe opening balance of one of the 31-day billing cycles for ...

#queThe opening balance of one of the 31-day billing cycles for Lorenzo''s credit card was $4100, but after 15 days Lorenzo made a payment of $2300 to decrease his balance, and it

What is the de-merger, What is the De-merger This is splitting up of a ...

What is the De-merger This is splitting up of a group into two or more separate bodies. The group is split into separate entities, but the shareholders remain the same. It is o

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd