Question

Gather data from multiple sources about forfeiting a and present that data in one to two pages (12-point font, double-spaced). Be sure to document your sources.

ACCT 540 Research Cases

For Course Project Case 1
Nancy Corporation agreed to sell its common stock to Eddie Corporation for five monthly payments of $100,000. Eddie Corporation made the first payment, but did not make any other payments. According to the stock subscription agreement, Eddie Corporation forfeits its payment and is entitled to no further consideration. How should Nancy Corporation account for the $100,000 forfeited payment?

Answer 1

Issue:
How should Narda record the $200,000 forfeited payment?

Analysis:
The gain of $200,000 Narda Corporation would be excluded from net income under §505-10-25 -2 from the FASB Codification. The forfeited payment from Effie Corporation results in a credit to Narda under §505-10-25 -2(a).
For the purposes of accounting treatment of the $200,000, it would be treated as comprehensive income under §220-10-20(b) because the forfeited payment represents a change in Narda Corp’s equity.

Conclusion:
The forfeited payment of $200,000 from Effie Corporation should be excluded from net income, and treated as comprehensive income from accounting treatment. Thus, the forfeited cash should become part of additional paid-in capital about any required disclosures for such transactions.