On January 1, 2024, Felix Austead Athletic Club (FAAC) granted stock options to key executives exercisable for 500,000 shares of the company’s common stock at $18 per share. The stock options are intended as compensation for the next four years. The options are exercisable within a four-year period beginning January 1, 2028, by the executives still in the employ of the company. No options were terminated during 2024, but the company anticipates 5% forfeitures over the life of the stock options. The market price of the common stock was $18 per share at the date of the grant. FAAC estimated the fair value of the options at $4 each. 1% of the options are forfeited during 2025 due to executive turnover. What amount should FAAC record as compensation expense for the year ended December 31, 2025, assuming FAAC chooses the option not to estimate forfeitures?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On January 1, 2024, Felix Austead Athletic Club (FAAC) granted stock options to key executives exercisable for 500,000 shares of the company’s common stock at $18 per share. The stock options are intended as compensation for the next four years. The options are exercisable within a four-year period beginning January 1, 2028, by the executives still in the employ of the company. No options were terminated during 2024, but the company anticipates 5% forfeitures over the life of the stock options. The market price of the common stock was $18 per share at the date of the grant. FAAC estimated the fair value of the options at $4 each. 1% of the options are forfeited during 2025 due to executive turnover. What amount should FAAC record as compensation expense for the year ended December 31, 2025, assuming FAAC chooses the option not to estimate forfeitures?

 

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