As part of its stock-based compensation package, International Electronics (IE) granted 46 million stock appreciation rights (SARs) to top officers on January 1, 2024.

• At exercise, holders of the SARs are entitled to receive stock equal in value to the excess of the market price at exercise over the share price at the date of grant.
• The SARs cannot be exercised until the end of 2027 (vesting date) and expire at the end of 2029.
• The $1 par common shares have a market price of $46 per share on the grant date.
• The fair value of the SARs, estimated by an appropriate option pricing model, is $3 per SAR at January 1, 2024.
• The fair value re-estimated at December 31, 2024, 2025, 2026, 2027, and 2028, is $4, $3, $4, $2.50, and $3, respectively.
• All recipients are expected to remain employed through the vesting date.

Required:

1a.Will the SARs be reported as debt or as equity?

1b. Record any necessary journal entry on December 31, 2024 when the fair value of the SARs is estimated at $4 per SAR.

2. Record any necessary journal entry on December 31, 2025 when the fair value of the SARs is estimated at $3 per SAR.

3. Record any necessary journal entry on December 31, 2026 when the fair value of the SARs is estimated at $4 per SAR.

4. Record any necessary journal entry on December 31, 2027 when the fair value of the SARs is estimated at $2.50 per SAR.

5. Record any necessary entry on December 31, 2028 when all of the SARs remain unexercised.

6. Record any necessary entry on June 6, 2029 when the SARs are exercised and the share price is $50.