Futuristic Products Company established a stock appreciation rights (SARS) program which entitles its new president Jill Castleberry to receive cash for the difference between the market price of the stock and a preestablished price of $30 a share on 20,000 shares. The date of grant is December 31, 2014 and requires the president remain in her position during 2015, 2016 and 2017. As of January 1, 2018, the SARS are exercisable for 5 years before they lapse. Jill exercises the SARS on January 2, 2020. The company has adopted the fair value method of expensing its SARS to employees and it has run the Black-Scholes pricing model for them. The company controller has also updated the pricing model through the date that the SARS were exercised. The "total" fair value (i.e., the preestablished price has not been deducted yet) for all SARS per the original run of the model (and the updated runs) are shown below. Date Estimated Total Fair Value of SARS /per share 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 21/31/2019 020למו1 $30 36 39 45 36 48 48 A. Prepare a Schedule of Compensation Expense pertaining to the SARS for the period 2015 - 2020. B. Prepare the journal entry for compensation expense in 2014, 2018, and 2019.
Futuristic Products Company established a stock appreciation rights (SARS) program which entitles its new president Jill Castleberry to receive cash for the difference between the market price of the stock and a preestablished price of $30 a share on 20,000 shares. The date of grant is December 31, 2014 and requires the president remain in her position during 2015, 2016 and 2017. As of January 1, 2018, the SARS are exercisable for 5 years before they lapse. Jill exercises the SARS on January 2, 2020. The company has adopted the fair value method of expensing its SARS to employees and it has run the Black-Scholes pricing model for them. The company controller has also updated the pricing model through the date that the SARS were exercised. The "total" fair value (i.e., the preestablished price has not been deducted yet) for all SARS per the original run of the model (and the updated runs) are shown below. Date Estimated Total Fair Value of SARS /per share 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 21/31/2019 020למו1 $30 36 39 45 36 48 48 A. Prepare a Schedule of Compensation Expense pertaining to the SARS for the period 2015 - 2020. B. Prepare the journal entry for compensation expense in 2014, 2018, and 2019.
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 52P
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Transcribed Image Text:Futuristic Products Company established a stock appreciation rights (SARS) program which entitles
its new president Jill Castleberry to receive cash for the difference between the market price of the
stock and a preestablished price of $30 a share on 20,000 shares. The date of grant is December 31,
2014 and requires the president remain in her position during 2015, 2016 and 2017. As of January
1, 2018, the SARS are exercisable for 5 years before they lapse. Jill exercises the SARS on January
2, 2020. The company has adopted the fair value method of expensing its SARS to employees and it
has run the Black-Scholes pricing model for them. The company controller has also updated the
pricing model through the date that the SARS were exercised. The "total" fair value (i.e., the
preestablished price has not been deducted yet) for all SARS per the original run of the model (and
the updated runs) are shown below.
Date
Estimated Total Fair Value of SARS /per share
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
21/31/2019
020למו1
$30
36
39
45
36
48
48
A. Prepare a Schedule of Compensation Expense pertaining to the SARS for the period 2015 -
2020.
B. Prepare the journal entry for compensation expense in 2014, 2018, and 2019.
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