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On 1/1/18 The ABC Corp. issues 5,000,000 stock appreciation rights valued at $75,000,000 ($15 each). The...

On 1/1/18 The ABC Corp. issues 5,000,000 stock appreciation rights valued at $75,000,000 ($15 each). The stock appreciation rights are for 3 years. At the end of 2017, 2018, 2019, respectively, the value of the rights are $12, $8, and $6.

Record the yearly entries for 2017, 2 018 and 2019 assuming:

a. The SARS are distributable in common stock.

b. They are payable in cash.

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Answer #1

                               

Year

Fair Value

Cumulative compensation

2017

$12

$60000000

2018

$8

$40000000

2019

$6

$30000000

2017

Liability under Appreciation Right--------------------Dr $60000000

To Cash ----------------------------------------------------------------------Cr $60000000

2018

Liability under Appreciation Right--------------------Dr $40000000

To Cash ----------------------------------------------------------------------Cr $40000000

2019

Liability under Appreciation Right--------------------Dr $30000000

To Cash ----------------------------------------------------------------------Cr $30000000

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