Reference no: EM133053951

Question - On January 2, 2020, FRUIT COCKTAIL Company grants 50 shares each to 400 employees, conditional upon the employees' remaining in the company's employ during the vesting period. The shares will vest at the end of 2020 if the company's earnings increased by more than 15%; at the end 2021, if the earnings increased by an average of 12% over the two-year period; or at the end of 2022 if the earnings increased by an average of 10% over the three-year period. The shares have a fair value of P25 on January 2, 2020, which is equal to the share price on the grant date.

At the end of 2020, earnings had increased by 13% and 20 employees have left and the company expects that earnings will continue to increase at a similar rate in 2021 and expects to vest 2021. The company also expects that a further 20 employees will leave during 2021.

At the end of 2021, earnings increased by only 9% and therefore, shares do not vest at the end of 2021. Also, 15 employees have left the company in 2021 but expects that 10 employees will leave the company in 2022. The company expects that earnings will continue to increase at a similar rate.

At the end of 2022, earnings increased by 9% and 5 employees have left the company in 2022.

Required -

1. What amount of compensation expense should the company recognize in its income statement for the calendar year 2020?

2. What amount of compensation expense should the company recognize in its income statement for the calendar year 2021?