Date Fair Value Cumulative Compensation Recognizable Percentage Accrued Compensa

Question

Date

Fair Value

Cumulative Compensation Recognizable

Percentage
Accrued

Compensation
Accrued to Date

Expense
2011

Expense
2012

Expense
2013

Expense
2014

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

On December 31, 2010, Beckford Company issues 127,000 stock-appreciation rights to its officers entitling them to receive cash for the difference between the market price of its stock and a pre-established price of $9. The fair value of the SARs is estimated to be $5 per SAR on December 31, 2011; $2 on December 31, 2012; $10 on December 31, 2013; and $8 on December 31, 2014. The service period is 4 years, and the exercise period is 7 years.

(a) Prepare a schedule that shows the amount of compensation expense allocable to each year affected by the stock-appreciation rights plan. (If the compensation decreases from prior year enter the amount as a negative number in the table e.g. -25,000 or (25,000).)

Date

Fair Value

Cumulative Compensation Recognizable

Percentage
Accrued

Compensation
Accrued to Date

Expense
2011

Expense
2012

Expense
2013

Expense
2014

12/31/11

$

$

%

$

$

$

$

$

12/31/12

%

12/31/13

%

12/31/14

%

$

(b) Prepare the entry at December 31, 2014, to record compensation expense, if any, in 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

(c) Prepare the entry on December 31, 2014, assuming that all 127,000 SARs are exercised. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Expense

2011

b)

c)

Date Fair value Cumulative compnesation recognizable Percentage accrued Compensation accrued to date

Expense

2011

expense 2012 expense 2013 expense 2014 12/31/11 5 $635,000 25% $158,750 - 12/31/12 2 $254,000 50% $127,000 ($31,750) 12/31/13 10 $1,270,000 75% $952,500 $825,500 12/31/14 8 $1,016,000 100% $1,016,000 $63,500

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