Use the following information for questions 75 through 77.
On January 1, 2014, Korsak, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 100,000 SARs. Current market prices of the stock are as follows: Compensation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2014.
-On December 31, 2016, 25,000 SARs are exercised by executives. What amount of compensation expense should Korsak recognize for the year ended December 31, 2016?

Question

Use the following information for questions 75 through 77.
On January 1, 2014, Korsak, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 100,000 SARs. Current market prices of the stock are as follows:  Compensation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2014.
-On December 31, 2016, 25,000 SARs are exercised by executives. What amount of compensation expense should Korsak recognize for the year ended December 31, 2016?

Quizplus · Accepted Answer

The compensation expense recognized for the year ended December 31, 2016, would be based on the fair value of the SARs (Stock Appreciation Rights) exercised. The correct amount is not provided in the question, but the answer selected as correct (A) $475,000, implies that this amount represents the fair value of the SARs exercised by the executives during the year. This value is typically calculated based on the difference between the market price of the stock at the exercise date and the predetermined price of the SARs, multiplied by the number of SARs exercised.

Use the Following Information for Questions 75 Through 77