Chapter 16, Problem 29E

To determine

Stock Appreciation Rights: Excess of market price of the share over the pre established price on the exercise date is called share appreciation. Stock appreciation rights enable employees to get compensation equal to the appreciation in the share. The accounting of these rights is based on how the company classifies this right as a liability or as equity.

Given Information: Stocks right issued: 150,000.

Price: $10.

Fair value: $4 per SAR on December 31, 2014;

                  $1 on December 31, 2015;

                  $10 on December 31, 2016;

 $9 on December 31, 2017.

Service period: 4 years.

Exercise period is 7 years.

(a) To prepare: To prepare a schedule of compensation expense allocable to each year.

To determine

(b) To prepare: To prepare the entry to record compensation expense.

To determine

(c) To prepare: To prepare the entry on December 31, 2017.