An entity granted a share appreciation right to the Business development manager of the company on January 1, 2019. After a three-year service period, the employee is entitled to receive cash equal to the appreciation in share price over the market value or predetermined price on January 1, 2019. The share appreciation right had the following terms: Service period – January 1, 2019 to December 31, 2021; Number of shares – 30,000 shares; Exercise date – January 1, 2022.F urther, the quoted prices of the entity’s share are: January 1, 2019 – 200. December 31, 2019 – 205. December 31, 2020 – 215 and December 31, 2021 – 230.
An entity granted a share appreciation right to the Business development manager of the company on January 1, 2019. After a three-year service period, the employee is entitled to receive cash equal to the appreciation in share price over the market value or predetermined price on January 1, 2019. The share appreciation right had the following terms: Service period – January 1, 2019 to December 31, 2021; Number of shares – 30,000 shares; Exercise date – January 1, 2022.F urther, the quoted prices of the entity’s share are: January 1, 2019 – 200. December 31, 2019 – 205. December 31, 2020 – 215 and December 31, 2021 – 230.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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An entity granted a share appreciation right to the Business development manager of the company on January 1, 2019. After a three-year service period, the employee is entitled to receive cash equal to the appreciation in share price over the market value or predetermined price on January 1, 2019. The share appreciation right had the following terms:
Service period – January 1, 2019 to December 31, 2021;
Number of shares – 30,000 shares;
Exercise date – January 1, 2022.F
urther, the quoted prices of the entity’s share are:
January 1, 2019 – 200.
December 31, 2019 – 205.
December 31, 2020 – 215 and
December 31, 2021 – 230.
Choose the letter of correct answer
- As a result of the share appreciation rights, what amount should be recognized as compensation expense for 2019?
a.50,000
b.75,000
c.150,000
d.0 - what amount should be reported as compensation expense for 2020?
a.450,000
b.150,000
c.100,000
d.50,000 - If the share appreciation rights are vested upon the officer or exercisable immediately, how much is the compensation expense for 2019?
a.450,000
b.150,000
c.75,000
d.None of the above
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