ACCT 304 Chapter 16 QUIZ
E 16 30 Stock Appreciation Rights Derrick Company establishes a stock appreciation rights program
that entitles its new president, Dan Scott, to receive cash for the difference between the market price of
the stock and a pre-established price of $30 (also market price) on January 1, 2011, on 40,000 SARs. The
date of grant is January 1, 2011, and the required employment (service) period is 4 years. President Scott
exercises all of the SARs in 2016. The fair value of the SARs is estimated to be $6 per SAR on December
31, 2011; $9 on December 31, 2012; $15 on December 31, 2013; $8 on December 31, 2014; and $18 on
December 31, 2015.
Instructions
(a) Prepare a 5-year (2011-2015) schedule of compensation expense pertaining to the 40,000 SARs
granted to president Scott.
(b) Prepare the journal entry for compensation expense in 2011, 2014, and 2015 relative to the
40,000 SARs.
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