Bonita, Inc. established a stock-appreciation rights (SARs) program on January 1
ID: 2551366 • Letter: B
Question
Bonita, Inc. established a stock-appreciation rights (SARs) program on January 1, 2017, which entitles executives to receive cash at the date of exercise for the difference between the market price of the stock and the pre-established price of $19 on 5,600 SARs. The required service period is 2 years. The fair value of the SARs are determined to be $5 on December 31, 2017, and $8 on December 31, 2018.
Compute Bonita’s compensation expense for 2017 and 2018.
Explanation / Answer
= 5600 SAR's x $5 x 1/2
= $ 14,000
= Total Expenses - Expenses recognised in 2017
= ( 5600 SAR's x $ 8) - $ 14000
= $ 44800 - $ 14000
= $ 30,800
Bonita’s compensation expense 2017