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Problem 2 An entity grants 100 cash share appreciation rights (SARs) to each of its 500 employees, on condition that the employees remain in its employ for the next three years. During year 1, 35 employees leave. The entity estimates that a further 60 will leave during years 2 and 3. During year 2, 40 employees leave and the entity estimates that a further 25 will leave during year 3. During year 3, 22 employees leave. At the end of year 3, 150 employees exercise their SARs, another 140 employees exercise at the end of year 4 and the remaining 1 13 employees exercise their SARs at the end of year 5. The entity estimates the fair value of the SARs at the end of each year in which a liability exists as shown below. At the end of year 3, all SARs held by the remaining employees vest. The intrinsic value of the SARs at the date of exercise (which equal the cash paid out) at the end of years 3, 4 and 5 are also shown below. Year Fair Value Intrinsic Value 1 P14.40 2 15.50 18.20 P15.00 4 21.40 20.00 5 25.00 Required: Compute for the amounts to be recognized as compensation expense and liability in year 1 to 5. (30 points)