question archive East Company issued 1,000 shares with P5 par to Howe as compensation for 1,000 hours of legal services performed
East Company issued 1,000 shares with P5 par to Howe as compensation for 1,000 hours of legal services performed
Subject:AccountingPrice:2.87 Bought7
East Company issued 1,000 shares with P5 par to Howe as compensation for 1,000 hours of legal services performed.
Howe usually bills P160 per hour for legal services. On the date of issuance, the share was trading on a public exchange at P140.
By what amount should the share premium account increase as a result of the transaction?
a. 135,000
b. 140,000
c. 155,000
d. 160,000
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Answer:
a .
Step-by-Step explanation
Share based compensation
-> use the fair value of the shares at grant or issue date thus the share premium account in this problem will increase by 135,000 computed as follows:
| Number of shares issued | 1,000 |
| multiply by: FV at issuance less par (140-5) | 135 |
| Share premium | 135,000 |
