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QUESTION 3
On 1 January 2019, Green Nature (GN) Bhd granted 500 share options to its 200 employees. The condition of the option stipulated that the employees were required to remain employed by the entity for three years from the grant date.
They will receive the shares on 1 January 2022. GN Bhd estimates that 10% of the employees will leave prior to the vesting date but is unable to estimate the fair value of the options on the grant date. On 31 December 2021,50 employees left the company.
The exercise price for the options was RM5 and the fair value of the company’s ordinary shares was as follows:
On 31 December 2021, GN Bhd purchased equipment for RM1 million from Roxy Metal Bhd. The price of GN Bhd’s shares on 31 December 2021 was RM2.00. The seller has agreed to accept payment for the equipment either in cash or in shares. The seller can choose either to receive 200,000 shares of GN Bhd to be issued on 1 March 2022, or to receive cash payment in three months’ time equivalent to the market value of 300,000 million shares. The estimated share price of GN Bhd was as follows:
CONFIDENTIAL § AC/JUL 2023/FAR570
On 1 January 2022, GN Bhd agreed to acquire one hectare of land located in Kubang Kerian, Kelantan. The board of directors has agreed that 100,000 ordinary shares will be issued for this purpose. The sales and purchase agreement were made and completed on 1 July 2022.
However, the value of the land cannot be reliably measured at the acquisition date. The settlement date would be on 31 December 2022. The fair value of the company’s ordinary shares was as follows:
Required:
a) Prepare journal entries for the acquisition and settlement of the land of GN Bhd. (show all workings). (6 marks)
b) Calculate the employee benefit expense and share-based payment reserve of GN Bhd for the years 2019, 2020, and 2021. (9 marks)
C) Discuss the accounting treatment of the equipment of GN Bhd on 31 December 2021 and 31 March 2022, if the seller chooses a cash-settled transaction. (5 marks) (Total: 20 marks)
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