Southport Ltd Grants 100 Share Appreciation Rights (SARs)to Each of Its

Southport Ltd grants 100 share appreciation rights (SARs) to each of its 50 employees on 1 July 2009.Each grant is conditional on the employee working for the company for the next 3 years.All SARs held by employees will vest at the end of 3 years.The intrinsic value (equals cash actually paid out) and estimates of the fair value of the SARs at the end of each year are as follows:
$$\begin{array} { | l | l | l | } \hline \text { Year ending } & \text { Fair value } & \text { Intrinsic value } \\\hline 30 \text { June } 2010 & \$ 7.20 & \\\hline 30 \text { June } 2011 & \$ 7.75 & \\\hline 30 \text { June } 2012 & \$ 9.10 & \$ 7.50 \\\hline 30 \text { June } 2013 & \$ 10.70 & \$ 10.00 \\\hline 30 \text { June } 2014 & & \$ 12.50 \\\hline\end{array}$$
Summary of actual and estimated employee departures and number of options exercised follow:
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Year ending } \\30 \text { June }\end{array} & \text { Actual departures } & \begin{array} { l } \text { Revised estimates of departures } \\\text { before the option vests }\end{array} & \begin{array} { l } \text { Number of employees that exercised } \\\text { the option }\end{array} \\\hline 2010 & 3 & \text { Further } 6 & \\\hline 2011 & 4 & \text { Further } 3 & \\\hline 2012 & 2 & \text { NA } & 15 \\\hline 2013 & - & - & 14 \\\hline 2014 & - & - & 12 \\\hline\end{array}$$
What is/are the journal entry/ies to recognise salary expense for Southport Ltd related to the share appreciation rights issued 1 July 2009 for the year ended 30 June 2013?

A)
$$\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 10820 & \\\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 10820 \\\hline & & & \\\hline \mathrm { Dr } & \text { Employee benefits expense } & 14000 & \\\hline \mathrm { Cr } & \text { Cash } & & 14000 \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 12436 & \\\hline \mathrm { Cr } & \text { Share capital (equity) } & & 12436 \\\hline & & & \\\hline \mathrm { Dr } & \text { Employee benefits expense } & 14000 & \\\hline \mathrm { Cr } & \text { Cash } & & 14000 \\\hline\end{array}$$
C)
$$\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 3180 & \\\hline \mathrm { Dr } & \text { Accrued salaries expense } & 10820 & \\\hline \mathrm { Cr } & \text { Cash } & & 14000 \\\hline\end{array}$$
D)
$$\begin{array} { | l | l | l | l | } \hline \mathrm { Dr } & \text { Employee benefits expense } & 14820 & \\\hline \mathrm { Cr } & \text { Accrued salaries expense } & & 10820 \\\hline \mathrm { Cr } & \text { Cash } & & 14000 \\\hline\end{array}$$

Correct Answer:

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