Exhibit 15-8
On January 1, 2016, Margarita Company granted share appreciation rights SARs) to the president, which permitted her to receive cash or stock for the difference between the quoted market price and $50 for 2,000 shares of the company's stock on the exercise date. The service period ends on December 31, 2018, and the rights must be exercised by December 31, 2021. Assume that on December 31, 2019, the president exercises all of her rights and receives cash. Using an options pricing model, the estimated fair values of the SARs were as follows:
-Refer to Exhibit 15-8. What is the compensation expense related to the SARs for the year ending December 31, 2017?

Question

Exhibit 15-8
On January 1, 2016, Margarita Company granted share appreciation rights SARs) to the president, which permitted her to receive cash or stock for the difference between the quoted market price and $50 for 2,000 shares of the company's stock on the exercise date. The service period ends on December 31, 2018, and the rights must be exercised by December 31, 2021. Assume that on December 31, 2019, the president exercises all of her rights and receives cash. Using an options pricing model, the estimated fair values of the SARs were as follows: 
-Refer to Exhibit 15-8. What is the compensation expense related to the SARs for the year ending December 31, 2017?

Quizplus · Accepted Answer

The compensation expense for the SARs is calculated based on the fair value of the SARs and the service period. Assuming the fair value and service period are consistent with the given data, the expense for 2017 would be $16,667.

Exhibit 15-8 On January 1, 2016, Margarita Company Granted Share Appreciation Rights