What is the pretax stock compensation, Financial Accounting

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Refer to the Consolidated Statements of Shareholders' Equity (pp. 62-63), Consolidated Statements of Cash Flow, including an abstract from Note 2, Cash Flow Information (pp. 61 and 72) and Note 15, Share-Based Awards (pp. 93-96), from the Consolidated Financial Statements of Harley-Davidson (hereafter HOG) 2008 Annual Report.

a) How many stock options were granted under the stock compensation plan (the Plan) in 2008? What is the pretax stock compensation expense recognized by HOG in 2008? Write the journal entry corresponding to recognition of share-based compensation before tax, and any associated tax effect. You may assume that "tax benefit of stock options" in the Consolidated Statements of Shareholders' Equity refers only to compensation expense recognition.

b) Suppose the FASB required recognition of options at grant date as giving rise to an intangible asset at date of grant and the issuance of equity as additional paid-in capital. Refer to this as the "modified FASB rule." Show the accounting entry that relates to the granting of new options in 2008 under this accounting treatment. Assuming the 2008 options vest in 5 years, show the journal entry HOG would record for 2009 compensation expense relating to the 2008 option grants using the modified FASB rule.

c) Show the journal entry corresponding to recognition of stock option exercises in 2008.

 

 

 


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