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Problem

Olympia Company establishes a stock appreciation rights program that entitles its new CEO to receive cash for the difference between the market price of the stock and a pre-established price of $20 (also market price) on December 31, 2018, on 50,000 SARs. The date of grant is December 31, 2015, and the required employment (service) period is 3 years. The CEO exercises all of the SARs on December 31, 2018. The market value of the stock fluctuates as follows: $19 per SARs on December 31, 2016; $23 on December 31, 2017; and $25 on December 31, 2018.

Instructions

(a) Prepare a 3-year (2016-2018) schedule of compensation expense pertaining to the 50,000 SARs granted the CEO.

(b) Prepare the journal entry for compensation expense in 2016, 2017, and 2018 relative to the 50,000 SARs.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92771652

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