AP-100Q: Problem 16

On December 31, 2017, Kalinga Co. issued share appreciation rights to 20 of its employees. The

rights will vest at the end of 3 years provided the employees remain with the company and provided

further that the average revenue growth over the same period is at 10%. The following are the

approved terms of the said rights:

If the average revenue is 10 to 15%, each employee will receive 10,000 share appreciation

rights.

If the average revenue is 16 to 20%, each employee will receive 20,000 appreciation rights.

If the average growth more than 20%, each employee will receive 30,000 rights.

On the grant date, each share appreciation right is determined to have a fair value of P6, Kalinga

expects an average growth rate of 12.5 percent during the 3 year vesting period and that 4 employees

will ultimately resign before the vesting period ends.

The following information are available from the company's records:

Year

Actual revenue

growth rate for the

year

Estimated

resignations

Fair Market

Value of the

share

appreciation

rights

2018 10% 4 6.00

2019 15% 4 6.75

2020 25% 5* 7.00

*actual

Requirements:

69. How much is the compensation expense in relation to the share appreciation rights to be

recognized in 2018?

a. 320,000 c. 720,000

b. 660,000 d. 960,000

70. How much is the compensation expense in relation to the share appreciation rights to be

recognized in 2019?

a. 1,080,000 c. 720,000

b. 960,000 d. 400,000

71. How much is the compensation expense in relation to the share appreciation rights to be

recognized in 2020?

a. 2,100,000 c. 1,710,000

b. 1,820,000 d. 1,380,000

72. What is the liability for the share appreciation rights to be recognized as of December 31, 2020?

a. 1,440,000 c. 2,160,000

b. 2,100,000 d. 3,150,000

AP-100Q: Problem 17

On January 1, 2019, Symphony grants its president the right to choose either 10,000 ordinary shares

or to receive cash payment equal to 8,000 shares. These are to vest after rendition of three years of

service. Par value of the company's share of stock is P40. The president exercised his rights on

September 30, 2022. The fair value information follow:

FMV

Compound instrument, 1/1/2019 P50

Shares 1/1/2019 52

Shares 12/31/2019 65

Shares 12/31/2020 74

Shares 12/31/2021 85

Required:

73. What is the total salaries expense to reported in relation to the compensation plan in 2019?

a. 520,000 c. 84,000

b. 173,333 d. 201,333

74. How much from the salaries expense in 2020 in relation to the compensation plan is attributed to

the liability component?

a. 394,667 c. 221,333

b. 249,333 d. 84,000

75. How much from the salaries expense in 2021 in relation to the compensation plan is attribute to

the equity component?

a. 28,000 c. 285,333

b. 313,333 d. 84,000