Courtland Company issues 25,000 SARS entitling executives to receive cash at the date of exercise for the difference between the market price and $30. The fair value of an SAR on the grant date is $4. The service period is 3 years. At the end of Year 3, the Liability for SARS is $125,000. In Year 4 when the market price of the stock is $42, the SARS are exercised. Which of the following is true when the SARS are exercised?.

Courtland Company issues 25,000 SARS entitling executives to receive cash at the date of exercise for the difference between the market price and $30. The fair value of an SAR on the grant date is $4. The service period is 3 years. At the end of Year 3, the Liability for SARS is $125,000. In Year 4 when the market price of the stock is $42, the SARS are exercised. Which of the following is true when the SARS are exercised?.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On January 1, 2024, Blue Incorporated issued stock options for 340,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 4% in three years. Blue initially estimates that it is not probable the goal will be achieved, but in 2025, after one year, Blue estimates that it is probable that divisional revenue will increase by 4% by the end of 2026. Ignoring taxes, what is the decrease in earnings in 2025? Multiple Choice $340,000 $680,000 $1,020,000 $1,360,000
Slytherin Services, Inc. granted 8 million of its $1 par common shares to executives subject to foreiture if employment is terminated within three years. The common shares have a market price of $6 per share on the grant date of the restricted stock award. Ignoring taxes, what is the total compensation cost pertaining to the restricted shares (first answer, no dollar signs or commas, rounded to the nearest whole dollar)?
IT Solutions Ltd. has a cash - settled SARS program for employees. These employees will receive a cash payment after five years of service, calculated as the excess of share price over $8.75. In early 20X1, employees in total are granted 180,000 units in the program. The fair value of one SARS unit is estimated at $1 at the end of 20X1, $3 at the end of 20X2, and $2 at the end of 20X3. Estimated retention is 90% at the end of 20X1, 88% at the end of 20X2, and 75% at the end of 20X3. The payment is made at the end of 20X 5. Required: Provide the journal entry to be recorded with respect to the SARS program at the end of 20X 1, 20X2, and 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)
Pastore Incorporated granted options for 1 million shares of its $1 par common stock at the beginning of the current year. The exercise price is $31 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $9.00 per option. What would be the total compensation indicated by these options?
On October 1, 2016, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in each of the next three years?
On January 1, 2024, Cori Ander Herbs granted restricted stock units (RSUs) representing 300,000 of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the shares. The common shares had a market price of $13 per share on the grant date. At the date of grant, the company anticipated that 5% of the recipients would leave the firm prior to vesting. In 2025, 1% of the options are forfeited due to executive turnover. The company chooses the option not to estimate forfeitures. What amount should the company record as compensation expense for the year ended December 31, 2025?

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