Problem:
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 December 31, 2008, on 40,000 SARs. The date of grand is December 31, 2008, and the required employment (service) period is 4 years. President Scott exercises all of the SARs in 2014. The fair value of the SARs is estimated to be $6 per SAR on December 31, 2009; $9 on December 31, 2010; $15 on December 31, 2011; $8 on December 31, 2012; and $18 on December 31, 2013.
Instructions:
(1) Prepare a 5-year (2009-2013) schedule of compensation expense pertaining to the 40,000 SARs granted to president Scott.
(2) Prepare the journal entry for compensation expense in 2009, 2012, and 2013 to the 40,000 SAR.