Question

On December 31, 2016, Splish Company issues 143,000 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. Prepare a schedule that shows the amount of compensation expense allocable to each year affected by the stock-appreciation rights plan. (If the compensation decreases from prior year enter the amount as a negative number in the table e.g. -25,000 or (25,000).) Percentage Accrued Expense 2017 Compensation Accrued to Date Cumulative Compensation Recognizable Expense 2018 Expense 2019 Expense 2020 Date Fair Value 12/31/17 $ 12/31/18 12/31/19 12/31/20 Prepare the entry at December 31, 2020, to record compensation expense, if any, in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit Prepare the entry on December 31, 2020, assuming that all 143,000 SARs are exercised. (Credit account tities are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

Q1

		Cumulative		Compensation
	Fair	Compensation	Percentage	Accrued to	Expense	Expense	Expense	Expense
Date	Value	Recognizable	Accrued	Date	2017	2018	2019	2020
12/31/17	$5	$715,000	25%	$             178,750	$   178,750
				$              (35,750)		$ (35,750)
12/31/18	$2	$286,000	50%	$             143,000
				$             822,250			$       822,250
12/31/19	$9	$1,287,000	75%	$             965,250
				$             178,750				$   178,750
12/31/20	$8	$1,144,000	100%	$          1,144,000

Ques	Accounts	debit	credit
b	Compensation expense	$ 178,750
	liability under stock appreciation plan		$ 178,750
c	liability under stock appreciation plan	1144000
	cash		1144000
	(143000*8)