On October 1, 2016, Farmer Fabrication issued stock options for 100,000 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 Farmer Fabrication’s stock price increases by 5% in three years. Farmer initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in each of the next three years?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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On October 1, 2016, Farmer Fabrication issued stock options for 100,000 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 Farmer Fabrication’s stock price increases by 5% in three years. Farmer
initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in
each of the next three years?

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