On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. Theoptions 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. Farmerinitially estimates that it is not probable the goal will be achieved. How much compensation will be recorded ineach of the next three years?
On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. Theoptions 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. Farmerinitially estimates that it is not probable the goal will be achieved. How much compensation will be recorded ineach of the next three years?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On October 1, 2018, 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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