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On January 1, 2022, Siewart, Inc. granted 14.5 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within four years. The common shares have a market price of $6 per share on the grant date. Ignoring taxes, and assuming that Siewart has a December 31st year end, what is the effect of this grant on Siewart's 2023 earnings?

Respuesta :

Answer and Explanation:

The computation of the impact of the grants on 2023 earnings is as follows:

The Total value of shares is

= 14.5 million per share × $6 per share

= $87 million

Now for one year it is

= $87 ÷ 4 years

= $21.75 million

By this same amount i.e. $21.75 would be reduced in the first years and reduced in future years accordingly

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