On January 1, 2024, Blue Incorporated issued stock options for 340,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 4% in three years. Blue initially estimates that it is not probable the goal will be achieved, but in 2025, after one year, Blue estimates that it is probable that divisional revenue will increase by 4% by the end of 2026. Ignoring taxes, what is the decrease in earnings in 2025? Multiple Choice $340,000 $680,000 $1,020,000 $1,360,000
On January 1, 2024, Blue Incorporated issued stock options for 340,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 4% in three years. Blue initially estimates that it is not probable the goal will be achieved, but in 2025, after one year, Blue estimates that it is probable that divisional revenue will increase by 4% by the end of 2026. Ignoring taxes, what is the decrease in earnings in 2025? Multiple Choice $340,000 $680,000 $1,020,000 $1,360,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2024, Blue Incorporated issued stock options for 340,000 shares to a division manager. The options
have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are
not exercisable unless divisional revenue increases by 4% in three years. Blue initially estimates that it is not
probable the goal will be achieved, but in 2025, after one year, Blue estimates that it is probable that divisional
revenue will increase by 4% by the end of 2026. Ignoring taxes, what is the decrease in earnings in 2025?
Multiple Choice
$340,000
$680,000
$1,020,000
$1,360,000
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