Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1, 2024, the company issued 480,000 executive stock options permitting executives to buy 480,000 shares of Pastner stock for $40 per share. One-fourth of the options vest in each of the next four years beginning at December 31, 2024 (graded vesting). Pastner elects to separate the total award into four groups (or tranches) according to the year in which they vest and measures the compensation cost for each vesting date as a separate award. The fair value of each tranche is estimated at January 1, 2024, as follows: Amount Fair Value ok Vesting Date Vesting per Option December 31, 2024 25% $ 4.10 nt December 31, 2025 25% $ 4.60 ences December 31, 2026 December 31, 2027 25% $ 5.40 25% $ 5.60 Required: 1. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately. 2. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner uses the straight-line method to allocate the total compensation cost. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately. Note: Enter your answers in whole dollars.
Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1, 2024, the company issued 480,000 executive stock options permitting executives to buy 480,000 shares of Pastner stock for $40 per share. One-fourth of the options vest in each of the next four years beginning at December 31, 2024 (graded vesting). Pastner elects to separate the total award into four groups (or tranches) according to the year in which they vest and measures the compensation cost for each vesting date as a separate award. The fair value of each tranche is estimated at January 1, 2024, as follows: Amount Fair Value ok Vesting Date Vesting per Option December 31, 2024 25% $ 4.10 nt December 31, 2025 25% $ 4.60 ences December 31, 2026 December 31, 2027 25% $ 5.40 25% $ 5.60 Required: 1. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately. 2. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner uses the straight-line method to allocate the total compensation cost. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately. Note: Enter your answers in whole dollars.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1,
2024, the company issued 480,000 executive stock options permitting executives to buy 480,000 shares of Pastner stock for $40 per
share. One-fourth of the options vest in each of the next four years beginning at December 31, 2024 (graded vesting). Pastner elects to
separate the total award into four groups (or tranches) according to the year in which they vest and measures the compensation cost
for each vesting date as a separate award. The fair value of each tranche is estimated at January 1, 2024, as follows:
Amount
Fair Value
ok
Vesting Date
Vesting
per Option
December 31, 2024
25%
$ 4.10
nt
December 31, 2025
25%
$ 4.60
ences
December 31, 2026
December 31, 2027
25%
$ 5.40
25%
$ 5.60
Required:
1. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates
the compensation cost for each of the four groups (tranches) separately.
2. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner uses the
straight-line method to allocate the total compensation cost.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates
the compensation cost for each of the four groups (tranches) separately.
Note: Enter your answers in whole dollars.
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