Question

On December 31, 2016, Stellar Company issues 153,000 stock-appreciation rights to its officers entitling them to receive cash for the difference between the market price of its stock and a pre-established price of $9. The fair value of the SARs is estimated to be $5 per SAR on December 31, 2017; $2 on December 31, 2018; $9 on December 31, 2019; and $8 on December 31, 2020. The service period is 4 years, and the exercise period is 7 years.

a.  

Prepare a schedule that shows the amount of compensation expense allocable to each year affected by the stock-appreciation rights plan.

b.  

Prepare the entry at December 31, 2016, to record compensation expense, if any, in 2016.

c.  

Prepare the entry on December 31, 2016, assuming that all 153,000 SARs are exercised.

Answer 1

Answer mpensato KA chedule expende ww w Ostprecia w Www w - Page No ① @ Schedule of compensation expende stock oppreciation rights plan (163000 Din comulative Percentage Compersation Expense Expense Expense Expense Compensation e accrued Accrued to 2017 2018 2019 2020 recognizable 153000 5 20 | 31 |2017 $5 - 465000 25% $191250 $191850 -- $38250 1838250) 12/31/2018 $2 306000 504, $153000 Date dale $879750 $819750. | 21342019 $9 1377000 75% $1032750 $191250 $1224000 $191250 12/30/2020 $ 8 1224000 100% pense © compensation Jowtha en Mu Credit Jowinal entry to recorde compensation de prense Particular Debit Compensation expense $191250 liabililig under stocke appaeciation plan $19.950 Credit . Particular liability under stock appreciation plan Cash [153000 X 8) Debit $1224000 $1224000