As part of its stock-based compensation package, International
Electronics granted 24 million stock appreciation rights (SARs) to
top officers on January 1, 2018. At exercise, holders of the SARs
are entitled to receive cash or stock equal in value to the excess
of the market price at exercise over the share price at the date of
grant. The SARs cannot be exercised until the end of 2021 (vesting
date) and expire at the end of 2023. The $1 par common shares have
a market price of $46 per share on the grant date. The fair value
of the SARs, estimated by an appropriate option pricing model, is
$3 per SAR at January 1, 2018. The fair value re-estimated at
December 31, 2018, 2019, 2020, 2021, and 2022, is $4, $3, $4,
$2.50, and $3, respectively. All recipients are expected to remain
employed through the vesting date.
Required:
1. to 3. Prepare the appropriate journal
entries pertaining to the SARs on January 1, 2018 and December 31,
2018–December 31, 2021. The SARs remain unexercised on December 31,
2022, prepare the appropriate entry.
4. The SARs are exercised on June 6, 2023, when
the share price is $50, and executives choose to receive the market
price appreciation in cash. Prepare the appropriate journal
entry(s) on that date.
As part of its stock-based compensation package, International Electronics granted 24 million sto...
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As part of its stock-based compensation package, on January 1, 2018, Weldon Well Supplies granted restricted stock units (RSUs) representing 100,000 $1 par common shares. At exercise, holders of the RSUs are entitled to receive cash or stock equal in value to the market price of those shares at exercise. The RSUs cannot be exercised until the end of 2021 (vesting date) and expire at the end of 2023. The $1 par common shares have a market price of $6.9...
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