Answered

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On January 1, 2020, Coronado Industries established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next four years for the difference between the market price of its common stock and a pre-established price of $20 on 129000 SARs. Current market prices of the stock are as follows: January 1, 2020 $35 per share December 31, 2020 38 per share December 31, 2021 30 per share December 31, 2022 33 per share Compensation expense relating to the plan is to be recorded over a four-year period beginning January 1, 2020. What amount of compensation expense should Coronado recognize for the year ended December 31, 2020

Sagot :

Tundexi

Answer:

$2,322,000

Explanation:

Stock appreciation right means employees will get increase is price benefit from the company rather than exercise shares.

On 31 Dec, 2020. Share price = $38, SAR exercise price = $20. Increase in price = ($38 - $20) = $18 per share

Total compensation expense = SARs * Increase in price

Total compensation expense = 129,000 SARs * $18

Total compensation expense = $2,322,000

So, the amount of compensation expense should Coronado recognize for the year ended December 31, 2020 is $2,322,000.

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