On 1 July 2023 Lurline Ltd provides its managing director with a share-based incentive according to which she is offered a bonus that is calculated as 100 000 times the increase in the fair value of the entity’s share price above $5.00. When the bonus was offered the share price was $4.50. If the managing director does not leave the organisation the accrued entitlement will be paid after three years. However, if she leaves the organisation the accrued entitlement will be paid out upon departure—that is, the benefit will not be forfeited. Other information: The share price at 30 June 2024 is $4.00. The share price at 30 June 2025 is $5.50. The share price at 30 June 2026 is $6.00. The managing director stays for three years and is paid the bonus on 1 July 2026. Need to answer the following; Prepare the journal entries that would appear in the accounting records of Lurline Ltd to account for the issue of the share appreciation rights.
On 1 July 2023 Lurline Ltd provides its managing director with a share-based incentive according to which she is offered a bonus that is calculated as 100 000 times the increase in the fair value of the entity’s share price above $5.00. When the bonus was offered the share price was $4.50. If the managing director does not leave the organisation the accrued entitlement will be paid after three years. However, if she leaves the organisation the accrued entitlement will be paid out upon departure—that is, the benefit will not be forfeited. Other information: The share price at 30 June 2024 is $4.00. The share price at 30 June 2025 is $5.50. The share price at 30 June 2026 is $6.00. The managing director stays for three years and is paid the bonus on 1 July 2026. Need to answer the following; Prepare the journal entries that would appear in the accounting records of Lurline Ltd to account for the issue of the share appreciation rights.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On 1 July 2023 Lurline Ltd provides its managing director with a share-based incentive according to which she is offered a bonus that is calculated as 100 000 times the increase in the fair value of the entity’s share price above $5.00. When the bonus was offered the share price was $4.50. If the managing director does not leave the organisation the accrued entitlement will be paid after three years. However, if she leaves the organisation the accrued entitlement will be paid out upon departure—that is, the benefit will not be forfeited.
Other information:
- The share price at 30 June 2024 is $4.00.
- The share price at 30 June 2025 is $5.50.
- The share price at 30 June 2026 is $6.00.
- The managing director stays for three years and is paid the bonus on 1 July 2026.
Need to answer the following;
Prepare the
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