On January 1, 2010, Korsak, Inc. established a stock appreciation rights plan fo

Question

On January 1, 2010, Korsak, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next 4 years for the difference between the market price of its common stock and a pre-established price of $20 on 60,000 SARs. Current market prices of the stock are as follows:

January 1, 2010 $35 per share
December 31, 2010 38 per share
December 31, 2011 30 per share
December 31, 2012 33 per share

Compensation expense relating to the plan is to be recorded over a 4-year period beginning January 1, 2010.

On December 31, 2012, 16,000 SARs are exercised by executives. What amount of compensation expense should Korsak recognize for the year ended December 31, 2012? (Points : 4)
$285,000

$195,000

$585,000

$78,000

Explanation / Answer

($33 - $20) x 60,000 x .75 = $585,000

($30 - $20) x 60,000 x .5 = $300,000

Amount of compensation expense = $585,000 – $300,000 = $285,000

$285,000.................(answer)

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.