On January 1, 2020, Panic Company granted to a senior executive 30,000 share options, conditional upon the executive's remaining in the entity's employ until December 31, 2022. The par value per share is P50. The exercise price is P 100. However, the exercise price drops to P80 if the entity's earnings increase by at least an average of 10% per year over the three-year period. On grant date, the entity estimated that the fair value of the share option is P30 if the exercise price is P80. If the exercise price is P 100, the fair value of the share option is P 25. During 2020 and 2021, the earnings increased by 11% and 12% respectively. However, during 2022, the earnings increased only by 4%. What amount should be recognized as compensation expense for 2022? a. 300,000 b. 600,000 c. 150,000 d. 750,000
On January 1, 2020, Panic Company granted to a senior executive 30,000 share options, conditional upon the executive's remaining in the entity's employ until December 31, 2022. The par value per share is P50. The exercise price is P 100. However, the exercise price drops to P80 if the entity's earnings increase by at least an average of 10% per year over the three-year period. On grant date, the entity estimated that the fair value of the share option is P30 if the exercise price is P80. If the exercise price is P 100, the fair value of the share option is P 25. During 2020 and 2021, the earnings increased by 11% and 12% respectively. However, during 2022, the earnings increased only by 4%. What amount should be recognized as compensation expense for 2022?
a. 300,000
b. 600,000
c. 150,000
d. 750,000
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