The Following Information Relates to Questions
on 1 July 2013

question 1

Multiple Choice

The following information relates to questions
On 1 July 2013 Watson Pty Ltd granted 100 share appreciation rights (SARS) to each of its 50 employees, conditional on the employee not leaving the company in the next three years. The company estimates the fair value of the SARS at the end of each year in which a liability exists as shown in the table below. The intrinsic values of the SARS at the date of exercise at 30 June 2016, 2017 and 2018 are also shown. All SARS held by employees at 30 June 2016 vest.
$\begin{array}{|l|l|l|}\hline \text { Year ended } & \text { Fair value } & \text { Intrinsic value } \\\hline 30 \text { June } 2014 & \$ 14.40 &\\\hline \text { 30 June } 2015 & \$ 15.50 & \\\hline \text { 30 June } 2016 & \$ 18.20 & \$ 15.00 \\\hline 30 \text { June } 2017 & \$ 21.40 & \$ 20.00 \\\hline 30 \text { June } 2018 & & \$ 25.00 \\\hline\end{array}$
By 30 June 2016 nine employees have left and 15 employees have exercised their SARS.
-The amount recognised as an expense for the year ended 30 June 2016 is:

• A) $5987
• B) $22 500
• C) $28 487
• D) $47 320

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Definitions:

Term Deposit

A type of bank deposit that has a fixed term and typically offers a higher interest rate than savings accounts.

Down Payment

An initial upfront portion of the total amount due, often associated with the purchase of expensive goods like homes or cars, which is paid at the time of the sale.

Term Deposit

A deposit at a financial institution that has a fixed term and typically offers a higher interest rate than a regular savings account.

Simple Interest

A method of calculating interest where the charge is based on the original principal amount alone, without compounding.