The Davis Corporation granted a share appreciation right plan to its employees onDecember 31, 20x0. A total of 300,000 share appreciation rights were granted. Thevesting period ends on December 30, 20x2. The exercise period starts December 31,20x2 and ends December 31, 20x4.Data on the fair values of the SAR's, the average cash out amount, the number of SAR'sexercised, and management's estimate of the % of SAR's that will vest is as follows:DateFair Value ofeach SAR atyear-endAverage cashout for exercisedSARS during theyearAmount ofSARSexercisedEstimate of % ofSARS that willvestDecember 31,20x1$775%December 31,20x211$885,00072% (actual)December 31,20x391057,000December 31,20x41274,000Required -a. What is the compensation expense for the year ended December 31, 20x2?b. What is the compensation expense for the year ended December 31, 20x4?

Year 1 (31st Dec 20X1): Expense = total no of SAR*FV at year end*estimate of % that will best / no…

Answered: a. What is the compensation b. What is…

a. What is the compensation b. What is the compensation expense for the year ended December 31, 20x2? expense for the year ended December 31, 20x4?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

The Davis Corporation granted a share appreciation right plan to its employees on
December 31, 20x0. A total of 300,000 share appreciation rights were granted. The
vesting period ends on December 30, 20x2. The exercise period starts December 31,
20x2 and ends December 31, 20x4.
Data on the fair values of the SAR's, the average cash out amount, the number of SAR's
exercised, and management's estimate of the % of SAR's that will vest is as follows:
Date
Fair Value of
each SAR at
year-end
Average cash
out for exercised
SARS during the
year
Amount of
SARS
exercised
Estimate of % of
SARS that will
vest
December 31,
20x1
$7
75%
December 31,
20x2
11
$8
85,000
72% (actual)
December 31,
20x3
9
10
57,000
December 31,
20x4
12
74,000
Required -
a. What is the compensation expense for the year ended December 31, 20x2?
b. What is the compensation expense for the year ended December 31, 20x4?

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