Just In Co. issues 500,000 SARS units to its eight-member top management group. These SARS allow the managers to receive a cashpayment after holding the SARS for five years. The SARS vest on the payment date. The value of the SARSS is calculated as thedifference between the $34 per share fair market value of common shares on the date the SARS were issued and the fair market valueon the date of payment. The company estimates that six of eight managers will remain with the company over the five-year period.This estimate remains unchanged over the first four years. One manager leaves after Year 2, one after Year 3, and one in Year 5, sothat only five managers were paid at the end of Year 5.The fair value of one SARS unit was estimated using a valuation model and was,$17; and in Year 5, the actual market price of common shares was $53.the end of Year 1, $4; Year 2, $1; Year 3, $2; Year 4,Required:1. Not available in Connect.2. How much compensation expense would be recorded in each of Years 1 to 5? (Do not round intermediate calculations. Enterrecoveries (if any) with a minus sign.)Year14Fraction1/52/53/54/55/8Retention75 %75 %75 %75 %62.5 %Fair valueCurrent balanceCompensation expense 3. What would appear on the SFP at the end of each of Years 1 to 4? (Do not round intermediate calculations.)Year14Cumulative amount SARS Liability4. What entry would be made on the maturity (payment) of the SARS? Assume that years' entry for expense has been already made. (Ifno entry is required for a transaction/event, select "No journal entry required" in the first account field.)View transaction listJournal entry worksheet1>Record the entry for payments to be made on maturity of SAR's.

SOLUTION WORKING MARKET PRICE OF SARS AT AGREEMENT DATE 53 LESS - MARKET PRICE OF SHARE -34…

Just In Co. issues 500,000 SARS units to its eight-member top management group. These SARS allow the managers to receive a cash payment after holding the SARS for five years. The SARS vest on the payment date. The value of the SARS is calculated as the difference between the $34 per share fair market value of common shares on the date the SARS were issued and the fair market value on the date of payment. The company estimates that six of eight managers will remain with the company over the five-year period. This estimate remains unchanged over the first four years. One manager leaves after Year 2, one after Year 3, and one in Year 5, so that only five managers were paid at the end of Year 5. The fair value of one SARS unit was estimated using a valuation model and was, at the end of Year 1, $4; Year 2, $1; Year 3, $2; Year 4, $17; and in Year 5, the actual market price of common shares was $53. Required: 1. Not available in Connect. 2. How much compensation expense would be recorded in each of Years 1 to 5? (Do not round intermediate calculations. Enter recoveries (if any) with a minus sign.) Year 1 2 3 4 Fraction 1/5 2/5 3/5 4/5 5/8 Retention 75 % 75 % 75 % 75 % 62.5 % Fair value Current balance Compensation expense

Just In Co. issues 500,000 SARS units to its eight-member top management group. These SARS allow the managers to receive a cash payment after holding the SARS for five years. The SARS vest on the payment date. The value of the SARS is calculated as the difference between the $34 per share fair market value of common shares on the date the SARS were issued and the fair market value on the date of payment. The company estimates that six of eight managers will remain with the company over the five-year period. This estimate remains unchanged over the first four years. One manager leaves after Year 2, one after Year 3, and one in Year 5, so that only five managers were paid at the end of Year 5. The fair value of one SARS unit was estimated using a valuation model and was, at the end of Year 1, $4; Year 2, $1; Year 3, $2; Year 4, $17; and in Year 5, the actual market price of common shares was $53. Required: 1. Not available in Connect. 2. How much compensation expense would be recorded in each of Years 1 to 5? (Do not round intermediate calculations. Enter recoveries (if any) with a minus sign.) Year 1 2 3 4 Fraction 1/5 2/5 3/5 4/5 5/8 Retention 75 % 75 % 75 % 75 % 62.5 % Fair value Current balance Compensation expense

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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