Just In Company issues 270,000 SARS units to its 10 member top management group. These SARS...
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Just In Company issues 270,000 SARS units to its 10 member top management group. These SARS allow the managers to receive a cash payment after holding the SARS for five years. The SARS vest on the payment date. The value of the SARS is calculated as the difference between the $32 per share fair market value of common shares on the date the SARS were issued and the fair market value on the date of payment. The company estimates that 7 of 10 managers will remain with the company over the five-year period. This estimate remains unchanged over the first four years. One manager leaves after Year 2, one after Year 3, and one in Year 5, so that only five managers were paid at the end of Year 5. The fair value of one SARS unit was estimated using a valuation model and was, at the end of Year 1, $5; Year 2, $2; Year 3, $6; Year 4, $21; and in Year 5, the actual market price of common shares was $59. Required: 1. This part of the question is not part of your Connect assignment. 2. How much compensation expense would be recorded in each of Years 1 to 5? (Do not round Intermediate calculations. Enter recoveries (if any) with a minus sign.) Answer is complete but not entirely correct. Year 2 Fraction 1/5 2/5 Retention 70 % 70 %6 3 3/5 70 96 4 4/5 70 % Fair value $ 1,350,000 $ 540,000 $ 1,620,000 $ 5,670,000 Current balance $ 0 $ 189,000 $ (378,000) x Compensation $ 189,000 expense $ (378,000) x $ 7,182,000 $ 5,292,000 x $ 2,494,800 5 5/10 70.0 % $10,260,000 $ 8,073,000 $ 1,927,800 3. What would appear on the SFP at the end of each of Years 1 to 4? (Do not round Intermediate calculations.) Answer is complete and correct. Year Cumulative amount SARS Liability $ 189,000 2 $151,200 $ 680,400 3 $ 3,175,200 4. What entry would be made on the maturity (payment) of the SARS? Assume that years' entry for expense has been already made. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) Answer is complete and correct. No Transaction General Journal 1 1 Long-term compensation liability Cash Debit 5,103,000 Credit 5,103,000 Just In Company issues 270,000 SARS units to its 10 member top management group. These SARS allow the managers to receive a cash payment after holding the SARS for five years. The SARS vest on the payment date. The value of the SARS is calculated as the difference between the $32 per share fair market value of common shares on the date the SARS were issued and the fair market value on the date of payment. The company estimates that 7 of 10 managers will remain with the company over the five-year period. This estimate remains unchanged over the first four years. One manager leaves after Year 2, one after Year 3, and one in Year 5, so that only five managers were paid at the end of Year 5. The fair value of one SARS unit was estimated using a valuation model and was, at the end of Year 1, $5; Year 2, $2; Year 3, $6; Year 4, $21; and in Year 5, the actual market price of common shares was $59. Required: 1. This part of the question is not part of your Connect assignment. 2. How much compensation expense would be recorded in each of Years 1 to 5? (Do not round Intermediate calculations. Enter recoveries (if any) with a minus sign.) Answer is complete but not entirely correct. Year 2 Fraction 1/5 2/5 Retention 70 % 70 %6 3 3/5 70 96 4 4/5 70 % Fair value $ 1,350,000 $ 540,000 $ 1,620,000 $ 5,670,000 Current balance $ 0 $ 189,000 $ (378,000) x Compensation $ 189,000 expense $ (378,000) x $ 7,182,000 $ 5,292,000 x $ 2,494,800 5 5/10 70.0 % $10,260,000 $ 8,073,000 $ 1,927,800 3. What would appear on the SFP at the end of each of Years 1 to 4? (Do not round Intermediate calculations.) Answer is complete and correct. Year Cumulative amount SARS Liability $ 189,000 2 $151,200 $ 680,400 3 $ 3,175,200 4. What entry would be made on the maturity (payment) of the SARS? Assume that years' entry for expense has been already made. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) Answer is complete and correct. No Transaction General Journal 1 1 Long-term compensation liability Cash Debit 5,103,000 Credit 5,103,000
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Related Book For
Intermediate Accounting Volume 2
ISBN: 9781260881240
8th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel
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