C is corrent. The 30,000 stock appreciation rights (SAR) entitle the holders to receive cash equal to the excess of the market price of the stock on the exercise date over $20. At 12/31/Y2, the estimate of total SAR compensation expense is $240,000 [30,000 × ($28 – $20)]. Since the required service period is 3 years, this total expense will be allocated over a 3-year period. By the end of year 2, the second year, 2/3 of the total estimated compensation expense should be accrued, resulting in a SAR liability of $160,000 (2/3 × $240,000).
A is incorrect. The 30,000 stock appreciation rights (SAR) entitle the holders to receive cash equal to the excess of the market price of the stock on the exercise date over $20. At 12/31/Y2, the estimate of total SAR compensation expense is $240,000 [30,000 × ($28 – $20)]. Since the required service period is 3 years, this total expense will be allocated over a 3-year period. By the end of year 2, the second year, 2/3 of the total estimated compensation expense should be accrued, resulting in a SAR liability of $160,000 (2/3 × $240,000).
A is incorrect. The 30,000 stock appreciation rights (SAR) entitle the holders to receive cash equal to the excess of the market price of the stock on the exercise date over $20. At 12/31/Y2, the estimate of total SAR compensation expense is $240,000 [30,000 × ($28 – $20)]. Since the required service period is 3 years, this total expense will be allocated over a 3-year period. By the end of year 2, the second year, 2/3 of the total estimated compensation expense should be accrued, resulting in a SAR liability of $160,000 (2/3 × $240,000).
D is incorrect because a liability is recorded on the date of grant.
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