Please Do not Give image format On January 1, 2021, Z Companygranted 100,000 stock options tocertain executives. The optionsare exercisable no sooner thanDecember 31, 2024, and expire onJanuary 1, 2031. Each option canbe exercised to acquire one shareof $1 par common stock for $10.An option-pricing modelestimates the fair value of theoptions to be $5 on the date ofgrant.If unexpected turnover in 2022caused the company to estimatethat 10% of the options would beforfeited, what amount should Zrecognize as compensationexpense for 2022?

Z Company Compensation expenses for 2021 = 100,000 * 5 = $500,000 = $500,000 / 4 = $125,000

Answered: If unexpected turnover in 2022 caused…

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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Please Do not Give image format

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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