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Exhibit 15-8
On January 1, 2016, Margarita Company granted share appreciation rights (SARs) to the president, which permitted her to receive cash or stock for the difference between the quoted market price and $50 for 2,000 shares of the company's stock on the exercise date. The service period ends on December 31, 2018, and the rights must be exercised by December 31, 2021. Assume that on December 31, 2019, the president exercises all of her rights and receives cash. Using an options pricing model, the estimated fair values of the SARs were as follows:
January 1, 2016
$10
December 31, 2016
15
December 31, 2017
20
December 31, 2018
19
December 31, 2019
23
Refer to Exhibit 15-8. What is the compensation expense related to the SARs for the year ending December 31, 2016?
A. $3,333
B. $10,000
C. $30,000
D. $33,333
Answer: B
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