As part of its stock-based compensation package, International Electronics (IE) granted 32 million stock appreciation rights (SARs) to top officers on January 1, 2021. 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 2024 (vesting date) and expire at the end of 2026. The $1 par common shares have a market price of $49 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, 2021. The fair value re-estimated at December 31, 2021, 2022, 2023, 2024, and 2025, is $4, $3, $4, $2.50, and $3, respectively. All recipients are expected to remain employed through the vesting date. Required:

1-a. Will the SARs be reported as debt or as equity? 1-b to 4. Prepare the appropriate journal entries pertaining to the SARs on January 1, 2021 and December 31, 2021December 31, 2024. Assuming the SARs remain unexercised on December 31, 2025, prepare the appropriate entry. Prepare the entry when the SARs are exercised on June 6, 2026, when the share price is $50.

• Req 1A
• Req 1B to 4

Prepare the appropriate journal entries pertaining to the SARs on January 1, 2021 and December 31, 2021December 31, 2024. Assuming the SARs remain unexercised on December 31, 2025, prepare the appropriate entry. Prepare the entry when the SARs are exercised on June 6, 2026, when the share price is $50. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)

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No	Date	General Journal	Debit	Credit
1	January 01, 2021	No journal entry required
2	December 31, 2021	Compensation expense
		Paid-in capital - SAR plan
3	December 31, 2022	Compensation expense
		Paid-in capital - SAR plan
4	December 31, 2023	Compensation expense
		Paid-in capital - SAR plan
5	December 31, 2024	Compensation expense
		Paid-in capital - SAR plan
6	December 31, 2025	No journal entry required
7	June 06, 2026	Paid-in capital - SAR plan
		Common stock
		Paid-in capital - excess of par