On January 1, 2016, Pall Corp. granted stock options to key employees for the purchase of 40,000 shares of the company’s common stock at $25 per share. The options are intended to compensate employees for the next two years. The options are exercisable within a four-year period beginning January 1, 2018, by the grantees still in the employ of the company. No options were terminated during 2016, but the company does have an experience of 4% forfeitures over the life of the stock options. The market price of the common stock was $32 per share at the date of the grant. Pall Corp. used the binomial pricing model and estimated the fair value of each of the options at $10. What amount should Pall charge to compensation expense for the year ended December 31, 2016? a. $153,600 b. $160,000 c. $192,000 d. $200,000
On January 1, 2016, Pall Corp. granted stock options to key employees for the purchase of 40,000 shares of
the company’s common stock at $25 per share. The options are intended to compensate employees for the
next two years. The options are exercisable within a four-year period beginning January 1, 2018, by the grantees
still in the employ of the company. No options were terminated during 2016, but the company does have
an experience of 4% forfeitures over the life of the stock options. The market price of the common stock was
$32 per share at the date of the grant. Pall Corp. used the binomial pricing model and estimated the fair value
of each of the options at $10. What amount should Pall charge to compensation expense for the year ended
December 31, 2016?
a. $153,600
b. $160,000
c. $192,000
d. $200,000
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