On January 1, 2021, Trent Company granted Dick Williams, an employee, an option to buy 400 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $5,400. Williams exercised his option on September 1, 2021, and sold his 400 shares on December 1, 2021. Quoted market prices of Trent Co. stock during 2021 were: January 1 $30 per share September 1 $36 per share December 1 $40 per share The service period is for two years beginning January 1, 2021. As a result of the option granted to Williams, using the fair value method, Trent should recognize compensation expense for 2021 on its books in the amount of a. $5,400. b. $6,000. c. $2,700. d. $0.
On January 1, 2021, Trent Company granted Dick Williams, an employee, an option to buy 400 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $5,400. Williams exercised his option on September 1, 2021, and sold his 400 shares on December 1, 2021. Quoted market prices of Trent Co. stock during 2021 were: January 1 $30 per share September 1 $36 per share December 1 $40 per share The service period is for two years beginning January 1, 2021. As a result of the option granted to Williams, using the fair value method, Trent should recognize compensation expense for 2021 on its books in the amount of a. $5,400. b. $6,000. c. $2,700. d. $0.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2021, Trent Company granted Dick Williams, an employee, an option to buy 400 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $5,400. Williams exercised his option on September 1, 2021, and sold his 400 shares on December 1, 2021. Quoted market prices of Trent Co. stock during 2021 were:
| January 1 | $30 per share |
| September 1 | $36 per share |
| December 1 | $40 per share |
The service period is for two years beginning January 1, 2021. As a result of the option granted to Williams, using the fair value method, Trent should recognize compensation expense for 2021 on its books in the amount of
a. $5,400.
b. $6,000.
c. $2,700.
d. $0.
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