On January 2, 2020, for past services rendered, Zeus Corp. granted Joanna Wood, its president, 18,000 stock appreciation rights that are exercisable immediately and expire on January 2, 2021. On exercise, Wood is entitled to receive cash for the excess of the market price of the shares on the exercise date over the market price on the grant date. Wood did NOT exercise any of the rights during 2020. The market price of Zeus's shares was $ 35 on January 2, 2020, and $ 45 on December 31, 2020. As a result of the stock appreciation rights, Zeus should recognize compensation expense for 2020 of
A) $ 0.
B) $ 180,000.
C) $ 630,000.
D) $ 810,000.

Question

Quizplus · Accepted Answer

The compensation expense is calculated as the difference between the market price at the end of the year and the market price at the grant date, multiplied by the number of rights. ($45 - $35) * 18,000 = $180,000.

On January 2, 2020, for Past Services Rendered, Zeus Corp