On January 1, 2016, M Company granted 100,000 stock options to certain executive
ID: 2478400 • Letter: O
Question
On January 1, 2016, M Company granted 100,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2018, and expire on January 1, 2022. Each option can be exercised to acquire one share of $1 par common stock for $10. An option-pricing model estimates the fair value of the options to be $5 on the date of grant.
If unexpected turnover in 2017 caused the company to estimate that 15% of the options would be forfeited, what amount should M recognize as compensation expense for 2017? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)
$116,667
$166,667
$50,000
$33,333
If unexpected turnover in 2017 caused the company to estimate that 15% of the options would be forfeited, what amount should M recognize as compensation expense for 2017? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)
Explanation / Answer
Answer is $116,667
Compensation expense to be recognised in year 2016 (100000*5)/3 166667