Sunland Company Stock Appreciation Rights (SARs) Compensation Expense Calculation - 2017

To calculate the compensation expense for the year ended December 31, 2017, we need to determine the intrinsic value of the stock appreciation rights (SARs) at the grant date and allocate it over the four-year period.

The intrinsic value of the SARs can be determined by subtracting the pre-established price of $20 from the market price of the stock at the grant date:

Intrinsic value of the SARs = Market price of the stock - Pre-established price = $35 - $20 = $15 per share

The total intrinsic value of the SARs can be calculated by multiplying the intrinsic value per share by the number of SARs:

Total intrinsic value of the SARs = Intrinsic value per share * Number of SARs = $15 * 117,000 = $1,755,000

To determine the compensation expense for the year ended December 31, 2017, we allocate one-fourth of the total intrinsic value over the four-year period:

Compensation expense for 2017 = Total intrinsic value / Number of years = $1,755,000 / 4 = $438,750

Therefore, Sunland should recognize $438,750 of compensation expense for the year ended December 31, 2017. The correct answer is not provided in the given options, and none of the options match the calculated amount.