A Disclosure Note from E Corp

question 58

Essay

A disclosure note from E Corp.'s 2013 annual report is shown below:
Employee Stock Purchase Plan. We have an employee stock purchase plan for all eligible employees. Compensation expense for the employee stock purchase plan is recognized in accordance with GAAP. Shares of our common stock may be purchased by employees at three-month intervals at 85% of the fair value on the last day of each three-month period. Employees may purchase shares having a value not exceeding 10% of their gross compensation during an offering period. Employees purchased the following shares: At June 30, 2013, 150 million shares were reserved for future issuance.
Required:
Describe the way "Compensation expense for the employee stock purchase plan is recognized in accordance with GAAP by E Corp. Include in your explanation the journal entry that summarizes employee share purchases during 2013.

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Definitions:

Competitive Buyer

An individual or entity that purchases goods or services in a market where there is competition, aiming to obtain the best possible price and quality.

Marginal Expenditure

The additional cost incurred from producing or purchasing one more unit of a good or service.

Average Expenditure

The average amount of money spent per unit of time, often calculated for goods, services, or a combination of both by consumers or businesses.

Monopsonist

A market condition where there is only one buyer for a product or service, giving the buyer significant power over prices.