On January 1, 2021, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2023, and expire on January 1, 2027. Each option can be exercised to acquire one share of $1 par common stock for $12. 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 M recognize as compensation expense for 2022? O $30,000. $60,000. O $120,000. O $150000

On January 1, 2021, M Company granted 90,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2023, and expire on January 1, 2027. Each option can be exercised to acquire one share of $1 par common stock for $12. 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 M recognize as compensation expense for 2022? O $30,000. $60,000. O $120,000. O $150000

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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On January 1, 2021, a company granted stock options for 89,000 shares of its $12 par value common stock to its key employees. Each option entitles the employees to purchase one share of common stock at $22. The Black-Scholes option pricing model determines total compensation expense to be $220,000. The options are exercisable beginning January 1, 2024. On January 1, 2024, when the market price of the stock was $35 per share, 5,000 options were exercised. To record the 5,000 options exercised, the company should record Cash in the amount of $__________. (if no cash amount should be recorded, then enter 0).
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