Question

Pina Company establishes a stock-appreciation rights program that entitles its new president Ben Davis to receive cash for the difference between the market price of the stock and a pre-established price of $32 (also market price) on December 31, 2016, on 25,400 SARs. The date of grant is December 31, 2016, and the required employment (service) period is 4 years. President Davis exercises all of the SARs in 2022. The fair value of the SARs is estimated to be $6 per SAR on December 31, 2017; $10 on December 31, 2018; $14 on December 31, 2019; $6 on December 31, 2020; and $17 on December 31, 2021.

1.

Prepare a 5-year (2017–2021) schedule of compensation expense pertaining to the 25,400 SARs granted president Davis. (If the compensation decreases from prior year enter the amount as a negative number in the table e.g. -25,000 or (25,000).) Date Fair Value Cumulative Compensation Recognizable Percentage Accrued Compensation Accrued to Date Expense 2017 Expense 2018 Expense 2019 Expense 2020 Expense 2021

2.

Prepare the journal entry for compensation expense in 2017, 2020, and 2021 relative to the 25,400 SARs

Answer 1

Date 12/3114 2131119 21300 1125400x Fair valut Fair value Cumulative Percentage compensation Expense expense Expense Expense Expense Coup en sallon I recognizably accrued acolhed to 2017 2018 2019 2020 2021 Date $6 $152400 $38100 38100 88900 254000 50% 127000 $88900 39700 355600 $139700 4547 2 66700 114300 152400 1152400 100.10 $114300 279400 $17 431800 $279 400 431800 $10 $14 212/20 $6 213171

2. Journal Entry 2017 Compensation Expense 38100 Liability under stocle Appreciation Plan 38100 2020 114300 Liability under stache Appreciatron Plan compensation Expense 114300 2014 Compensation Expense Dability under stocle 279400 Appreciation Plan 279400