Question

On December 31, 2013, Blossom Company issues 127,000 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 $10. The fair value of the SARS is estimated to be $4 per SAR on December 31, 2014; $1 on December 31, 2015; $10 on December 31, 2016; and $9 on December 31, 2017. The service period is 4 years, and the exercise period is 7 years. Prepare a schedule that shows the amount of compensation expense allocable to each year affected by the stock-appreciation rights plan. (If the compensation decreases from prior year enter the amount as a negative number in the table e.g. -25,0o0 or (25,000).) Cumulative Compensation Percentage Compensation Accrued to Date Expense 2014 Expense 2015 Expense 2016 Expense 2017 Fair Value Recognizable Date Accrued 12/31/14, 12/31/15 12/31/16 12/31/17 96 SHOW LIST OF ACCOUNTS LINK TO TEXT 96

Answer 1

Blossom Company Schedule of Compensation Expense 1,27,000 a. Affected by Stock Appreciation Rights Fair Cumulative Percentage Compensation Compensation Expense Expense Expense Expense 2017 Accrued Date Value Accrued to Date 2014 2015 2016 $4 $5,08,000 $1,27,000 $1,27,000 25% 31-12-2014 |($63,500) ($63,500) $63,500 $1 $1,27,000 50% 31-12-2015 $8,89,000 $8,89,000 $10 $12,70,000 $9,52,500 75% 31-12-2016 $1,90,500 $11,43,000 $1,90,500 $9 $11,43,000 100% 31-12-2017 $1,90,500 b. Compensation Expense Liability Under Stcok Appreciation Rights $1,90,500 $11,43,000 Liability Under Stcok Appreciation Rights c. Cash (127,000 * $9) $11,43,000