On December 31, 2016, Ayayai Company issues 118,000 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 $11. The fair value of the SARs is estimated to be $5 per SAR on December 31, 2017; $2 on December 31, 2018; $11 on December 31, 2019; and $9 on December 31, 2020. The service period is 4 years, and the exercise period is 7 years.
(a)
SAR | Price | Service period | Exercise period | |||||
12/31/2016 | 118,000 | $11 | 4 years | 7 years | ||||
Date | Fair value | Cumulative compensation recognizable [118,000 × Fair value] | Percentage Accrued | Compensation accrued to date | Expense 2017 | Expense 2018 | Expense 2019 | Expense 2020 |
12/31/2017 | $5 | $590,000 | 25% | $147,500 | $147,500 | |||
12/31/2018 | $2 | $236,000 | 50% | $118,000 | ($29,500) | |||
12/31/2019 | $11 | $1,298,000 | 75% | $973,500 | $944,000 | |||
12/31/2020 | $9 | $1,062,000 | 100% | $1,062,000 | $0 |
_________________________________________________________________________________________
(b)
Date | Account Title | Debit | Credit |
31/12/2020 | No entry |
__________________________________________________________________________________________
(c)
Date | Account Title | Debit | Credit |
31/12/2020 | Stock-Appreciation plan | $1,062,000 | |
Cash | $1,062,000 |
On December 31, 2016, Ayayai Company issues 118,000 stock-appreciation rights to its officers entitling them to...
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