Oriole Company establishes a stock-appreciation rights program that entitles its

Question

Oriole Company establishes a stock-appreciation rights program that entitles its new president Ben Davis to receive cash for the difference between thee market price of the stock and a pre-established price of $30 (also market price) on December 31, 2013, on 31,300 SARs. The date of grant is December 31, 2013, and the required employment (service) period is 4 years. President Davis exercises all of the SARs in 2019. The fair value of the SARs is estimated to be $6 per SAR on December 31, 2014; $8 on December 31, 2015; $16 on December 31, 2016; $6 on December 31, 2017; and $19 on December 31, 2018 (a) Prepare a 5-year (2014-2018) schedule of compensation expense pertaining to the 31,300 SARs granted president Davis. (If the compensation decreases from prior year enter the amount as a negative number in the table e.g. -25,000 or (25,000).) Cumulative Compensation Percentage Accrued to Compensation Expense 2014 Expense 2015 Expense 2016 Expense 2017 Expense 2018 DateFair Value Recognizable Accrued Date 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18

Explanation / Answer

Stock Appreciation Rights Date Fair Value (a) Cummulative Compensation recognizable (b) Percentage Accrued (c)=d/a*100 Compensation acrrued to date (d) Expense 2014 Expense 2015 Expense 2016 Expense 2017 Expense 2018 31-12-2014 187800 37560 20 37560 37560 62600 31-12-2015 250400 100160 40 100160 62600 200320 31-12-2016 500800 300480 60 300480 200320 -150240 31-12-2017 187800 150240 80 150240 -150240 444460 31-12-2018 594700 594700 100 594700 444460 Year 2014 Number of SAR 31300 Fair Value 6 Total Fair value 187800 Vesting Period 5 years Recognised expense in 2014 187800/5 37560 Year 2015 Number of SAR 31300 Fair Value 8 Total Fair value 250400 Vesting Period 5 years No of years expired 2 years Cummulative Value of SAR to be recognised as expense 250400*2/5 100160 SAR recognized as expense in 2015 100160-37560 62600 Year 2016 Number of SAR 31300 Fair Value 16 Total Fair value 500800 Vesting Period 5 No of years expired 3 Cummulative Value of SAR to be recognised as expense 500800*3/5 300480 SAR recognized as expense in 2016 300480-100160 200320 Year 2017 Number of SAR 31300 Fair Value 6 Total Fair value 187800 Vesting Period 5 No of years expired 4 Cummulative Value of SAR to be recognised as expense 150240 SAR recognized as expense in 2017 150240-300480 -150240 Year 2018 Number of SAR 31300 Fair Value 19 Total Fair value 594700 Vesting Period 5 No of years expired 5 Cummulative Value of SAR to be recognised as expense 594700 SAR recognized as expense in 2018 444460

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