Ferraro, Inc. established a stock appreciation rights (SAR) program on January 1
ID: 2379562 • Letter: F
Question
Ferraro, Inc. established a stock appreciation rights (SAR) program on January 1, 2012, which entitles executives to receive cash at the date of exercise for the difference between the market price of the stock and the pre-established price of $23 on 5,460 SARs. The required service period is 2 years. The fair value of the SAR's are determined to be $5 on December 31, 2012, and $12 on December 31, 2013.
Compute Perkins' compensation expense for 2012. $ Compute Perkins' compensation expense for 2013. $ Ferraro, Inc. established a stock appreciation rights (SAR) program on January 1, 2012, which entitles executives to receive cash at the date of exercise for the difference between the market price of the stock and the pre-established price of $23 on 5,460 SARs. The required service period is 2 years. The fair value of the SAR's are determined to be $5 on December 31, 2012, and $12 on December 31, 2013.Explanation / Answer
account...........................................debit...............credit
compensation expense........................5460
Liability SAR plan......................................................5460
analysis of compensation expense
fair value .................5
total increase in SAR value ........27300
protion recognised in this period ....1/2
compensation ecpense in 2012..........13650
b)
account...........................................debit...............credit
compensation expense........................79170
Liability SAR plan......................................................19170
analysis of compensation expense
fair value .................12
total increase in SAR value ........65520
previous compensation........ ....13650
compensation ecpense in 2013.........79170
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