If unexpected turnover in 2022 caused the company to estimate that 10% of the options would be forfeited, what amount should Z recognize as compensation expense for 2022?
If unexpected turnover in 2022 caused the company to estimate that 10% of the options would be forfeited, what amount should Z recognize as compensation expense for 2022?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2021, Z Company
granted 100,000 stock options to
certain executives. The options
are exercisable no sooner than
December 31, 2024, and expire on
January 1, 2031. Each option can
be exercised to acquire one share
of $1 par common stock for $10.
An option-pricing model
estimates the fair value of the
options to be $5 on the date of
grant.
If unexpected turnover in 2022
caused the company to estimate
that 10% of the options would be
forfeited, what amount should Z
recognize as compensation
expense for 2022?
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