eGear Company started a share appreciation plan on January 1, 2022, when it granted 200,000 rights to its executives. The vesting period is 2 years. The plan expires on January 1, 2024. The fair value of eGear’s SARs for the years ended December 31, 2022 and 2023, are as follows:

Employees exercise all SARs on January 1, 2024, when their fair value is $5.

Required

a. Prepare all journal entries to record the SAR plan assuming that the rights are settled with cash.

b. Prepare all journal entries to record the SAR plan assuming that the rights are settled with the company’s$1 par value common stock. On the date of exercise, the market price per share is $20.

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Date December 31, 2022 December 31, 2023 Fair Value $6 $5