Question

On January 1, 2019, as a form of executive compensation, Wadlin Corporation grants share appreciation rights to Robert Brandt. These rights entitle Brandt to receive cash equal to the excess of the quoted market price over a $20 option price for 4,000 shares of the company’s common stock on the exercise date. The service period is 3 years (which Brandt is expected to complete), and the rights must be exercised within 5 years. Brandt exercises his rights on December 31, 2022. The fair value per SAR was as follows: 12/31/19, $3.00; 12/31/20, $4.20; 12/31/21, $4.00; and 12/31/22, $5.00. The quoted market price per share of common stock was $25 on December 31, 2022.

Required:

1.	Prepare a schedule to compute the compensation expense related to this SAR plan for 2019 through 2022.
2.	Prepare the December 31, 2022, journal entry related to this SAR plan.

Answer 1

Styles 567 Schedule to compute the compensation expense Particulars 12/13/19 1 2/13/20 12/13/21 12/13/22 $3.00 $420 MM 4.000 $4.00 4,000 $5.00 4,000 4,000 $12,000 $16,800 $16,000 $20,000 Fair Value per SAR Number of shares entitled under the right Estimated total compensation cost Fraction of service accrued Total compensation expense to date Previously recognized compensation expense Compensation Expense 1/3 Years $4,000 2/3 Years $11,200 3/3 Years $16,000 3/3 Years $20,000 (4,000) (11,200) (16,000) $4,000 $7,200, $4,800 A $4,000 2022 $20,000 Dec. 31 Cash SAR Payable $20,000 Cash (4,000 ($25 – $20)]