Discuss issue of the stock appreciation rights

Assignment Help Accounting Basics

Reference no: EM131881997

Question: On 1 July 2011 L Ltd provides its managing director with a share-based incentive in which she is offered a bonus that is calculated as 100,000 times the increase in the fair value of the entity's share price above $5. When the bonus was offered the share price was $4.5. If the managing director does not leave the organisation the accrued entitlement will be paid after three years. However, if she leaves the organisation the accrued entitlement will be paid out upon that is, the benefit will not be forfeited.

Other information: The share price at 30 June 2012 is $4.

The share price at 30 June 2013 is $5.5.

The share price at 30 June 2014 is $6.

The managing director stays for three years and is paid the bonus on 1 July 2014.

Required: Prepare the journal entries that would appear in the accounting records of L Ltd to account for the issue of the stock appreciation rights.

Reference no: EM131881997

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