Question
In: Accounting
On January 1, 2020, Sweet Corporation granted its president a share appreciation rights (SARs) package covering...
On January 1, 2020, Sweet Corporation granted its president a
share appreciation rights (SARs) package covering employment over a
three-year period. The package was based on SARs increases for
20,100 shares over the fair value on January 1, 2020 of $17 per
common share. The SARs package to be paid in cash at the end of the
third year (i.e., December 31, 2022).
The fair values of the Sweet shares were as follows:
| December 31, 2020 | $19/share | |
| December 31, 2021 | $22/share | |
| December 31, 2022 | $20/share |
Prepare the journal entries to record the Share Appreciation Rights
(SARs) package, and the payment on December 31, 2022 assuming that
Sweet follows ASPE.
Solutions
Expert Solution
| Date | Account title | Debit $ | Credit $ |
| Dec 31, 2020 | Compensation expense | $ 40,200 | |
| Liability for appreciation right | $ 40,200 | ||
| [To provide for the Compensation expense] | |||
| Dec 31, 2021 | Compensation expense | $ 60,300 | |
| Liability for appreciation right | $ 60,300 | ||
| [To provide for the Compensation expense] | |||
| Dec 31, 2022 | Liability for appreciation right | $ 40,200 | |
| Compensation expense | $ 40,200 | ||
| [To provide for the Compensation expense] | |||
| Dec 31, 2022 | Liability for appreciation right | $ 60,300 | |
| Cash | $ 60,300 | ||
| [To record the exercise of rights] |
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