Capulet Company establishes a stock-appreciation rights program that entitles its new president Ben Davis to receive cash for the difference between the market price of the stock and a pre-established price of $30 (also market price) on December 31, 2016, on 30,000 SARs. The date of grant is December 31, 2016, and the required employment (service) period is 4 years. President Davis exercises all of the SARs in 2022. The fair value of the SARs is estimated to be $6 per SAR on December 31, 2017; $9 on December 31, 2018; $15 on December 31, 2019; $6 on December 31, 2020; and $18 on December 31, 2021.

Instructions

a. Prepare a 5-year (2017–2021) schedule of compensation expense pertaining to the 30,000 SARs granted president Davis.

b. Prepare the journal entry for compensation expense in 2017, 2020, and 2021 relative to the 30,000 SARs.