Discussion 1: "Contributed Capital & Treasury Stock"
• The Contributed Capital section of Shareholders Equity of the financial statement usually includes the capital stock and additional paid in capital. Discuss the FASB rationale for requiring additional disclosures regarding capital stock and additional paid in capital
• Accounting for Treasury Stock: What are treasury stocks? Why would a Corporation want to buy back its stock? Discuss the Cost Method and the Par Value Method for accounting for Treasury Stock.
Discussion 2: "Case C15-8: Compensatory Share Option Plans"
Tom Twitlet, president of Twitlet Corporation, is considering establishing a compensatory share option plan for the company's 20 top executives. Tom wants to set the terms of the plan so that the number of options the executives can exercise increases based on a specified increase in the com- pany's future earnings. Tom wants to make sure that the plan cannot be manipulated but, in addi- tion, it should properly motivate the executives to stay with the company and make it successful. Given this concern, he wants to know how the increase in earnings should be specified: Should it be a dollar amount or a percentage change, and should the change in earnings be compared to the company's past results or against industry results? He also is interested in understanding how to determine the service period of the plan. Finally, Tom wants to understand the accounting for the plan and how it will affect the company's financial statements.
Required:
• Prepare a memo that explains the issues involved in the terms used in this plan. Discuss the accounting for the terms of this type of compensatory share option plan.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.