100 120 140 QUESTION 3 PART A (20 marks) Rising Tide Ltd (RTL) operates two share-based payments schemes (Crystal and Diamond) for its employees and has two classes of ordinary shares (class A and class B) in issue. RTL prepares its financial statements at 31 March each year. Crystal scheme On 1 April 2017, RTL decided to award share options to all 1,000 employees provided they remained in employment for five years. At 1 April 2017, 20% of employees were expected to leave over the vesting period to 31 March 2022 and as at 31 March 2018, this expectation had risen to 25%. As at 31 March 2019, this expectation has reduced to 15%. The fair value of these options at 1 April 2017 was $20. The number of options per employee is conditional on the average profit before any expense for share options over the five years commencing 1 April 2017 as follows: Average profit No. of options per employee - From $im up to $1.2m Above $1.2m up to $1.4m Above $1.4m up to $1.6m Above $1.6m up to $1.8m 160 Above $1.8m 180 Profit for the year ended 31 March 2018 was $0.9 million and profit for the following four years was forecast to rise by $0.2 million a year. The awarding of the options was also conditional on the share price of RTL's ordinary shares (class A) reaching at least $8 per share by 31 March 2022. As at 31 March 2018, the estimated share price of RTL's ordinary shares (class A) at 31 March 2022 is $6. As at 31 March 2019, profit for the year ended 31 March 2019 was $1.2 million and profit for the following three years was forecast to rise by $0.3 million a year. Also on the same date, the estimated share price of RTL's ordinary shares (class A) at 31 March 2022 is $9. Diamond scheme On 1 April 2016, RTL granted 250 cash-settled share awards to each of its 150 employees on the condition that the employees remain in its employment for the next three years. Cash is payable at the end of three years based on the share price of the RTL's ordinary shares (class B) on that date minus a predetermined value of $10. During the year to 31 March 2017, 6 employees left and, at that date, RTL estimates that an additional 12 employees will leave during the following two years. During the year to 31 March 2018, 8 employees left and, at that date, RTL, estimates that an additional 7 employees will leave during the following one year. During the year to 31 March 2019, 6 employees left. None of the vested employees have exercised the awards at vesting date. The share prices of RTL's ordinary shares (class B) at 31 March 2017, 31 March 2018 and 31 March 2019 were $35 per share, $42 per share and $46 per share respectively. Required: () For Crystal scheme, prepare the journal entries of RTL for the years ended 31 March 2018 and 2019 respectively. Explain the basis on which the arrangements should be measured and the criteria which are used to allocate the total value of the arrangement to individual accounting periods (11 marks) (b) For Diamond scheme, prepare the journal entries of RTL. for the years ended 31 March 2017, 2018 and 2019 respectively. (9 marks)