Exercise 19-27 Stock appreciation rights; settlement in shares (Appendix B) As part of its stock-based compensation package, International Electronics granted 42 million stock appreciation rights (SARs) to top officers on January 1, 2016. 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 2019 (vesting date) and expire at the end of 2021. The S1 par common shares have a market price of $48 per share on the grant date. The fair value of the SARs, estimated by an appropriate option pricing model, is S3 per SAR at January 1, 2016 The fair value reestimated at December 31, 2016, 2017, 2018, 2019, and 2020, is $4, S3, $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 equity? Debt Equity 1-b to 4. Prepare the appropriate journal entries pertaining to the SARs on January 1, 2016 and December 31, 2016 December 31, 2019. Assuming the SARs remain unexercised on December 31, 2020, prepare the appropriate entry. Prepare the entry when the SARs are exercised on June 6, 2021, when the share price is S50. (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).)