Practice Problem 4 (25 minutes) In an effort to improve employee performance and company earnings, Tomatoes Inc. set up a cash-settled share appreciation compensation plan on January 1, 2020. On this date, the company issued 50 cash-settled share appreciation rights (SARS) to each of its 250 employees, giving employees the right to receive cash, based on the increase in the company's share price over the period the SARS are held. The SARS vest after employees provide three years of service. SARs can be exercised (for cash) from December 31, 2022 (after vesting), to December 31, 2024, when the plan expires. The benchmark price of the underlying shares was established at $60.00. Date January 1, 2020 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 SARs fair value Not required $7.20 $7.75 $9.10 $10.70 .50 Share market value $60.00 $62.75 $64.25 $65.50 $68.00 $66.50 Over the five-year period of the plan, the following events occurred: In 2020, 20 employees leave, and it is estimated that 45 more will leave before vesting. In 2021, 25 employees leave, and it is estimated that 35 more will leave before vesting. In 2022, 28 employees leave, and on December 31, 2022, 70 employees exercise their SARs. On December 31, 2023, 55 employees exercise their SARs. On December 31, 2024, all remaining employees (52) exercise their SARs before they expire. Required: a) Calculate the amounts to appear in the 2020 to 2024 statements of financial position and statements of comprehensive income of Tomatoes. b) Prepare the journal entries to record the above transactions. Practice Problem 4 (25 minutes) In an effort to improve employee performance and company earnings, Tomatoes Inc. set up a cash-settled share appreciation compensation plan on January 1, 2020. On this date, the company issued 50 cash-settled share appreciation rights (SARS) to each of its 250 employees, giving employees the right to receive cash, based on the increase in the company's share price over the period the SARS are held. The SARS vest after employees provide three years of service. SARs can be exercised (for cash) from December 31, 2022 (after vesting), to December 31, 2024, when the plan expires. The benchmark price of the underlying shares was established at $60.00. Date January 1, 2020 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 SARs fair value Not required $7.20 $7.75 $9.10 $10.70 .50 Share market value $60.00 $62.75 $64.25 $65.50 $68.00 $66.50 Over the five-year period of the plan, the following events occurred: In 2020, 20 employees leave, and it is estimated that 45 more will leave before vesting. In 2021, 25 employees leave, and it is estimated that 35 more will leave before vesting. In 2022, 28 employees leave, and on December 31, 2022, 70 employees exercise their SARs. On December 31, 2023, 55 employees exercise their SARs. On December 31, 2024, all remaining employees (52) exercise their SARs before they expire. Required: a) Calculate the amounts to appear in the 2020 to 2024 statements of financial position and statements of comprehensive income of Tomatoes. b) Prepare the journal entries to record the above transactions
