Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

xercise 19-30 (Algo) Stock appreciation rights; cash settlement (Appendix 19B) As part of its stock-based compensation package, International Electronics granted 14 million stock appreciation rights

xercise 19-30 (Algo) Stock appreciation rights; cash settlement (Appendix 19B)

As part of its stock-based compensation package, International Electronics granted 14 million stock appreciation rights (SARs) to top officers on January 1, 2021. At exercise, holders of the SARs are entitled to receive cash or 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 $50 per share on the grant date. The fair value of the SARs, estimated by an appropriate option pricing model, is $4.50 per SAR at January 1, 2021. The fair value re-estimated at December 31, 2021, 2022, 2023, 2024, and 2025, is $5.50, $4.50, $6, $1.40, and $4.50, respectively. All recipients are expected to remain employed through the vesting date. Required:

1. to 3. Prepare the appropriate journal entries pertaining to the SARs on January 1, 2021 and December 31, 2021December 31, 2024. The SARs remain unexercised on December 31, 2025, prepare the appropriate entry. 4. The SARs are exercised on June 6, 2026, when the share price is $60, and executives choose to receive the market price appreciation in cash. Prepare the appropriate journal entry(s) on that date.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

2. describe the relationship between exercise and mood states;

Answered: 1 week ago