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This post addresses SARs.

On January 1, 2010, Korswak, Inc. established a stock appreciation rights plan for its executives. It entitled them to receive cash at any time during the next 4 years for the difference between the market price of its common stock and a pre-established price of $20 on 60,000 SARs. Current market prices of the stock are as follows:

January 1, 2010 $35 per share
December 31, 2010 38 per share
December 31, 2011 30 per share
December 31, 2012 33 per share

Compensation expense relating to the plan is to be recorded over a 4 year period beginning January 1, 2010.

On December 12, 2012, 16,000 SARs are exercised by executives. What amount of compensation expense should Korsak recognize for the year ended December 31, 2012?

a) 285,000
b) 195,000
c) 585,000
d) 78,000

Solution Summary

The solution provides the correct answer with supporting calculations to determine the amount of compensation expense that Korsak should recognize for the year.

$2.19