CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

On January 1, 2011, Jackson Corporation granted its CEO, 40,000 stock appreciation rights, which are exercisable no sooner than December 31, 2014, and expire on January 1, 2017. On exercise, the CEO will receive cash for the excess of the stock's market price on the exercise date over the market price on the grant date. The market price of Jackson's stock was $20 on January 1, 2011, and $25 on December 31, 2011. As a result of the stock appreciation rights, Jackson Corporation should recognize compensation expense for 2011 of
A. $0
B. $50,000
C. $400,000
Explanation: Total compensation [($25 - 20) x 40,000] / vesting period (4 years).

User Contributed Comments 3

User Comment
ljamieson 1/4 of vesting period passed, expense 1/4 of options at intrinsic value.
SMcalister How do we get the vesting period here? I thought it was the difference from when they are allowed to exercise until expiry.
rjdelong vesting period is the time it takes for them to be able to exercise (grant date to earliest exercise date). think about your 401k, the vesting period is how long it takes for the money to become yours.
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