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Prepare the journal entry for compensation expense

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Reference no: EM131108271

1. (Stock-Appreciation Rights) Derrick Company establishes a stock-appreciation rights program that entitles its new president Dan Scott to receive cash for the difference between the market price of the stock and a pre-established price of $30 (also market price) on December 31, 2008, on 40,000 SARs. The date of grant is December 31, 2008, and the required employment (service) period is 4 years. President Scott exercises all of the SARs in 2014. The fair value of the SARs is estimated to be $6 per SAR on December 31, 2009; $9 on December 31, 2010; $15 on December 31, 2011; $8 on December 31, 2012; and $18 on December 31, 2013.

(a) Prepare a 5-year (2009-2013) schedule of compensation expense pertaining to the 40,000 SARs granted to President Scott.

(b) Prepare the journal entry for compensation expense in 2009, 2012, and 2013 relative to the 40,000 SARs. 

Reference no: EM131108271

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