Question

Bowles Company granted options on January 1, 2017, permitting executives to purchase 800,000 of the company’s...

Bowles Company granted options on January 1, 2017, permitting executives to purchase 800,000 of the company’s $1 par common stock within the next five years, but not before December 31, 2020 (the vesting date). The exercise price is set at the stock’s market price on the date of grant, $40 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. At 12/31/17, 90% of the options are estimated to vest, and the stock’s market value is $52/share. How much compensation expense should be recognized in 2016?

$3,600,000
$1,000,000
$ 900,000
$ 0

Pension plans in which employers promise to place a certain percentage of an employee’s wages into an investment fund are referred to as:

Post-retirement benefits.
Defined benefit plans.
Defined contribution plans.
Post-employment benefits.

Under US GAAP, the projected benefit obligation (PBO) would be increased by:

Actual return on plan assets that is lower than expected.
Amortization of prior service cost.
An increase in the actuary’s assumed discount (settlement) rate.
An increase in the estimated life expectancy of employees

Which category of cash flows may be presented by firms using the indirect or direct presentation format?

Operating
Investing
Financing
Collecting

For a US Firm, Which of the following would not be included in the operating activities section of the Statement of Cash Flows?

Paying $30,000 for income taxes
Paying $75,000 of dividends to common stockholders
Paying $250,000 of interest on outstanding bonds payable
Received $500,000 in dividends from passive investments classified as trading

Homework Answers

Answer #1

Ans2)Pension plans in which employers promise to place a certain percentage of an employee’s wages into an investment fund are referred to as Defined contribution plans.

Ans3) Under US GAAP, the projected benefit obligation (PBO) would be increased by: An increase in the actuary’s assumed discount (settlement) rate.

Ans4) The category of cash flows may be presented by firms using the indirect or direct presentation format includes operating, investing and financing details so that company can understand the position of the company by the end of the year.

Ans5) For a US Firm, paying $30,000 for income taxes would not be included in the operating activities section of the Statement of Cash Flows

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