Question

Lion Company granted 30,000 share appreciation rights which entitled key employees to receive cash equal to the differen...


Lion Company granted 30,000 share appreciation rights which entitled key employees to receive cash equal to the difference between P20 and the market price of the share on the date each right is exercised. The service period is 2019 through 2021, and the rights are exercisable in 2022. The market price of the share was P25 and P28 on December 31, 2019 and 2020, respectively. How much should be recorded as compensation expense for 2020?
A. 150,000
B. 120,000
C. 110,000
D. 10,000
E. answer not given

Answer

The employee compensation on share based payment is recognized on fair value at the end of each year and apportioned on each year of service.

Compensation expense for 2020 is as follows:

Accounting homework question answer, step 2, image 1

Resultant table:

Accounting homework question answer, step 2, image 2

Hence, option (c ) is correct.

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