Holden Company has a share appreciation rights plan for its key executives This SAR plan gives each qualifying executive the right to receive cash, stock, or a combination of both equal to the excess of the quoted market price over the option price of the companys $10 par common stock on the date of exercise The key characteristics and requirements of this SAR plan are as follows Option price Market price on date of grant Service period 4 years Exercise limit Within 6 years after the service period has expired On January 1, 2015, Sarah Mendelson was granted SARs to 10,000 shares of the companys common stock under the requirements of the SAR plan She is expected to complete the service period and receive cash on the date of exercise On December 31, 2019, Mendelson exercised her rights to receive $27,000 cash and the remainder in common stock The fair value per SAR was as follows 12 31 15, $4 00 12 31 16, $4 10 12 31 17, $3 80 12 31 18, $5 50 and 12 31 19, $6 00 The quoted market price per share of common stock was $16 on January 1, 2015, and $22 on December 31, 2019 Required 1 Prepare a schedule to compute the compensation expense related to this SAR plan for 2015 through 2019 2 Prepare the journal entries related to the SAR plan on December 31, 2015, through December 31, 2019 Holden Company Compensatory Share Option Computations 2015 2019 1 Date Fair Value per SAR Estimated Total Compensation Cost Percent Accrued Total Compensation Expense to Date Accrued Compensation Expense to Date Yearly Compensation Expense 2 12 31 15 3 12 31 16 4 12 31 17 5 12 31 18 6 12 31 19 7 Solution Holden Company Compensatory Share Option Computations 2015 2019 1 Date Fair Value per SAR Estimated Total Compensation Cost Percent Accrued Total Compensation Expense to Date Accrued Compensation Expense to Date Yearly Compensation Expense 2 12 31 15 3 12 31 16 4 12 31 17 5 12 31 18 6 12 31 19 7 For the journal entries related to the SAR plan, there should be two lines of journal entries each year except for 2019 2019 should have 6 lines of journal entries CHART OF ACCOUNTS Holden Company General Ledger ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 232 SAR Compensation Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 320 Additional Paid in Capital on Common Stock 331 Retained Earnings REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 522 Compensation Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

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Holden Company has a share appreciation rights plan for its key executives. This SAR plan gives each qualifying executive the right to receive cash, stock,

Holden Company has a share appreciation rights plan for its key executives. This SAR plan gives each qualifying executive the right to receive cash, stock, or a combination of both equal to the excess of the quoted market price over the option price of the companys $10 par common stock on the date of exercise. The key characteristics and requirements of this SAR plan are as follows:

	Option price: Market price on date of grant
	Service period: 4 years
	Exercise limit: Within 6 years after the service period has expired

On January 1, 2015, Sarah Mendelson was granted SARs to 10,000 shares of the companys common stock under the requirements of the SAR plan. She is expected to complete the service period and receive cash on the date of exercise. On December 31, 2019, Mendelson exercised her rights to receive $27,000 cash and the remainder in common stock. The fair value per SAR was as follows: 12/31/15, $4.00; 12/31/16, $4.10; 12/31/17, $3.80; 12/31/18, $5.50; and 12/31/19, $6.00. The quoted market price per share of common stock was $16 on January 1, 2015, and $22 on December 31, 2019.

Required:

1.	Prepare a schedule to compute the compensation expense related to this SAR plan for 2015 through 2019.
2.	Prepare the journal entries related to the SAR plan on December 31, 2015, through December 31, 2019.

Holden Company

Compensatory Share Option Computations

2015-2019

1	Date	Fair Value per SAR	Estimated Total Compensation Cost	Percent Accrued	Total Compensation Expense to Date	Accrued Compensation Expense to Date	Yearly Compensation Expense
2	12/31/15
3	12/31/16
4	12/31/17
5	12/31/18
6	12/31/19
7

Solution

Holden Company

Compensatory Share Option Computations

2015-2019

1	Date	Fair Value per SAR	Estimated Total Compensation Cost	Percent Accrued	Total Compensation Expense to Date	Accrued Compensation Expense to Date	Yearly Compensation Expense
2	12/31/15
3	12/31/16
4	12/31/17
5	12/31/18
6	12/31/19
7

For the journal entries related to the SAR plan, there should be two lines of journal entries each year except for 2019. 2019 should have 6 lines of journal entries.

CHART OF ACCOUNTS

Holden Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
232	SAR Compensation Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
320	Additional Paid-in Capital on Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
522	Compensation Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense