Task 1:
Ferraro, Inc. established a stock appreciation rights (SAR) program on January 1, 2012, which entitles executives to receive cash at the date of exercise for the difference between the market price of the stock and the pre-established price of $20 on 5,420 SARs. The required service period is 2 years. The fair value of the SAR's are determined to be $2 on December 31, 2012, and $9 on December 31, 2013.
Compute Ferraro's compensation expense for 2012.
Compute Ferraro's compensation expense for 2013.
Task 2:
Hillsborough Co. has an available-for-sale investment in the bonds of Schuyler with a carrying (and fair) value of $84,080. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $53,470. It is determined that this loss in value is other-than temporary. Prepare the journal entry, if any, to record the reduction in value.
Description/Account Debit Credit