On December 31, 2010, Beckford Company issues 124,800 stock-appreciation rights
ID: 2426751 • Letter: O
Question
On December 31, 2010, Beckford Company issues 124,800 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 $9. The fair value of the SARs is estimated to be $4 per SAR on December 31, 2011; $1 on December 31, 2012; $10 on December 31, 2013; and $9 on December 31, 2014. The service period is 4 years, and the exercise period is 7 years. (a) Prepare a schedule that shows the amount of compensation expense allocable to each year affected by the stock-appreciation rights plan.
Explanation / Answer
Share Appreciation Rights
Schedule of Compensation Expense
(1)
(2)
(3)
(4)
(5)
Date
Fair Value
Cumulative Compensation
Recognizable
Percentage Accrued
Cumulative Compensation Accrued to date
Expense
2011
Expense
2012
Expense
2013
Expense
2014
31/12/2011
$4
$499200
25%
$124800
$124800
($62400)
31/12/2012
$1
$124800
50%
$62400
($62400)
$873600
$873600
31/12/2013
$10
$1248000
75%
$936000
$187200
$187200
31/12/2014
$9
$1123200
100%
$1123200
Share Appreciation Rights
Schedule of Compensation Expense
(1)
(2)
(3)
(4)
(5)
Date
Fair Value
Cumulative Compensation
Recognizable
Percentage Accrued
Cumulative Compensation Accrued to date
Expense
2011
Expense
2012
Expense
2013
Expense
2014
31/12/2011
$4
$499200
25%
$124800
$124800
($62400)
31/12/2012
$1
$124800
50%
$62400
($62400)
$873600
$873600
31/12/2013
$10
$1248000
75%
$936000
$187200
$187200
31/12/2014
$9
$1123200
100%
$1123200
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