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.

---

Definitions:

Excise Tax

A tax imposed on specific goods, services, or activities, often included in the price of items like gasoline, alcohol, and tobacco.

Tax Wedge

The difference between the amount a buyer pays and the amount a seller receives for a good or service due to taxation.

Sellers

Individuals or entities that offer goods or services for sale in the market.

Excise Tax

A type of tax levied on specific goods, services, or activities, often aimed at discouraging undesirable behaviors or generating revenue.