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On January 1, 2000, Rye Co. established a stock appreciation rights plan for its executives. They could receive cash at any time during the next four years equal to the difference between the market price of the common stock and a preestablished price of $16 on 180,000 SARs. The market price is as follows: 12/31/00-$21; 12/31/01-$18; 12/31/02-$19; 12/31/03-$20. On December 31, 2002, 40,000 SARs are exercised, and the remaining SARs are exercised on December 31, 2003.

Instructions

(a) Prepare a schedule that shows the amount of compensation expense for each of the four years starting with 2006.

(b) Prepare the journal entry at 12/31/07 to record compensation expense.

(c) Prepare the journal entry at 12/31/09 to record the exercise of the remaining SARs.

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  • Category:- Accounting Basics
  • Reference No.:- M946113

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