Prepare the journal entries that would appear

Reference no: EM132970549

On 1 July 2015 Sitara Ltd provides its managing director with a share-based incentive, according to which he is offered a bonus that is calculated as 300 000 times the increase in the fair value of the entity's share price above $3.50. When the bonus was offered the share price was $2.15.

If the managing director does not leave the organisation the accrued entitlement will be paid after three years. However, if he leaves the organisation the accrued entitlement will be paid out upon departure-that is, the benefit will not be forfeited.

Other information

• The share price at 30 June 2016 is $4.00

• The share price at 30 June 2017 is $3.90

• The share price at 30 June 2018 is $5.10

The managing director stays for three years and is paid the bonus on 1 July 2018.

Question: Prepare the journal entries that would appear in the accounting records of Sitara Ltd to account for the issue of the share appreciation rights AND all relevant future dates until the director receives the bonus payment. Show all the working.

Reference no: EM132970549

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