On January 1, 2017, Cable Corporation Issues 15,000 Stock-Appreciation Rights

question 55

Multiple Choice

On January 1, 2017, Cable Corporation issues 15,000 stock-appreciation rights to its key executives. The terms of the plan state that the holders of the rights will receive a cash payment equal to the difference between the market price of the stock on the date of exercise and the pre-established price of $9 per share. There is a three-year vesting period and the rights may be exercised on January 1, 2020. The rights expire on January 1, 2022. The closing market prices follow: December 31, 2017 $12 per share
December 31, 2018 $15 per share
December 31, 2019 $13 per share
What is the appropriate journal entry on December 31, 2019? (Do not round any intermediate calculations. Round your final answer to the nearest dollar.)

• A) No journal entry.
• B) \(\begin{array}{|l|r|r|}
• \hline \text { Obligation under SAR Plan.} & 15,000 &\\
• \hline \text { Deferred Compensation } & & 15,000\\
• \hline
• \end{array}\)
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Compensation Expense } & 195,000 & \\
• \hline \text { Obligation under SAR Plan } & & 195,000 \\
• \hline
• \end{array}\]
• D) \(\begin{array}{|l|r|r|}
• \hline\text { Compensation Expense } & 19,500 \\
• \hline \text { APIC - SAR } && 19,500\\
• \hline
• \end{array}\)

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Definitions:

Black-Scholes

A mathematical model used for pricing European-style options, taking into account factors like volatility, underlying asset price, strike price, and time to expiration.

American Style Puts

Options that give the holder the right to sell a specific stock at a specified price before the option expires.

Pricing Model

A Pricing Model is a strategy or formula used to determine the best price for a product or service, based on factors such as cost, competition, and value to the customer.

ESOs

Employee Stock Options are options granted to employees as part of their compensation package, allowing them to purchase company stock at a set price.