Question

Apple Inc. provides its executives compensation under a variety of share-based compensation plans including restricted stock awards. The following disclosure note from Apple's 2007 annual report describes the plan created for the company's chief executive officer, Steve Jobs:

CEO Restricted Stock Award
On March 19, 2003, the Company's Board of Directors granted 10 million shares of restricted stock to the Company's CEO that vested on March 19, 2006. The amount of the restricted stock award expensed by the Company was based on the closing market price of the Company's common stock on the date of grant and was amortized ratably on a straight-line basis over the three-year requisite service period. Upon vesting during 2006, the 10 million shares of restricted stock had a fair value of $646.6 million and had grant-date fair value of $7.48 per share. The restricted stock award was net-share settled such that the Company withheld shares with value equivalent to the CEO's minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld of 4.6 million were based on the value of the restricted stock award on the vesting date as determined by the Company's closing stock price of $64.66. The remaining shares net of those withheld were delivered to the Company's CEO. Total payments for the CEO's tax obligations to the taxing authorities were $296 million in 2006 and are reflected as a financing activity within the Consolidated Statements of Cash Flows. The net-share settlement had the effect of share repurchases by the Company as it reduced and retired the number of shares outstanding and did not represent an expense to the Company. The Company's CEO has no remaining shares of restricted stock.

Required:
1. How much compensation did Apple record for its CEO related to the restricted stock in its fiscal year ended September 24, 2005?
2. What was the CEO's combined income tax and employment tax rate that Apple used to determine the shares to be withheld at vesting?
3. From the information provided in the disclosure note, recreate the journal entries Apple used to record compensation expense and its related tax effects on September 24, 2005, the end of the 2005 fiscal year.
4. From the information provided in the disclosure note, recreate the journal entries Apple used to record the vesting of the restricted stock and its related tax effects on March 16, 2006, assuming the remaining compensation expense already has been recorded.



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  • CreatedJuly 11, 2013
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