Aoun Limited established a stock appreciation rights program that entitled its new president, Angela Murfitt, to receive cash for the difference between the Aoun Limited common shares’ market price and a pre-established price of $32 (also market price) on December 31, 2010, on 40,000 SARs. The date of grant is December 31, 2011, and the required employment (service) period is four years. The common shares’ market value fluctuated as follows: December 31, 2011, $36; December 31, 2012, $40; December 31, 2013, $45; December 31, 2014, $36; December 31, 2015, $48. Aoun Limited recognizes the SARs in its financial statements. Angela Murfitt exercised half of the SARs on June 1, 2016. Assume that the entity follows ASPE.
Instructions
(a) Prepare a five-year (2011 to 2016) schedule of compensation expense pertaining to the 40,000 SARs granted to Murfitt.
(b) Prepare the journal entry for compensation expense in 2011, 2014, and 2015 relative to the 40,000 SARs.
(c) Prepare the entry at June 1, 2016, for the exercise of the SARs.