Question

What amount should be recognized as gain on reversal of share appreciation rights in 2021? *see attached a. 1,600,000 ...


What amount should be recognized as gain on reversal of share appreciation rights in 2021?
*see attached


a. 1,600,000
b. 1,200,000
c. 400,000
d. 0

Transcribed: On Jan. 1, 2020, Rukawa Company granted the chief executive officer (CEO) 80,000 share appreciation rights for past services. The rights are exercisable immediately and expire on Dec. 31, 2021. On exercise, the CEO is entitled to receive cash for the excess of the share market price on exercise date over the market price on grant date. The CEO did not exercise any of the rights in 2020. The CEO exercised the rights on Dec. 31, 2021 when the market price was Php115. The market price of the share was Php100 on Jan. 1, 2020 and Php120 on Dec. 31, 2020.

Answer

Compensation Expense-

Compensation Expense means all expenses and costs related with compensation and benefits provided to Consulting Personnel, counting, without drawback, salary, bonus, housing reimbursements, departure benefits, insurance costs, and any other benefits, perquisites or other compensation granted to Consulting Personnel.

Option c. 400,000 is correct answer.

The amount should be recognized as gain on reversal of share appreciation rights in 2021 is Php400,000

Explanation-

Date Particulars Debit Credit
Dec 31.2020 Compensation exp.(120-100) x 80,000 1,600,000  
  Share appreciation rights liability   1,600,000
       
Dec 31.2021 Share appreciation rights liability 1,600,000  
  Cash(115-100) x 80000   1,200,000
  Gain on reversal (Bal. fig.)   400,000
Recent Questions