Question

On January 1, 2020, Crane Company established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 124000 SARs. Current market prices of the stock are as follows:

January 1, 2020       $36 per share

December 31, 2020       39 per share

December 31, 2021       31 per share

December 31, 2022       34 per share

Compensation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2020. What amount of compensation expense should Crane recognize for the year ended December 31, 2021?

a. $465000

b. $0

c. $93000

d. $682000

Answer 1

solution Compensation 104 experse = (Number of options gerarted) x (option prece) X(time from grant date to fiscal year end) / (service perlod in years) 124000 X ( 31– 20) (2/4) = 682000 option (A) is correct.