Reference no: EM132961906
Question - On January 1, 2021, M Company granted 97,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2023, and expire on January 1, 2027. 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 $3 on the date of grant.
If unexpected turnover in 2022 caused the company to estimate that 15% of the options would be forfeited, what amount should M recognize as compensation expense for 2022?
On January 1, 2021, Felix Austead Athletic Club (FAAC) granted stock options to key executives exercisable for 511,000 shares of the company's common stock at $20 per share. The stock options are intended as compensation for the next four years. The options are exercisable within a four-year period beginning January 1, 2025, by the executives still in the employ of the company. No options were terminated during 2021, but the company anticipates 3% forfeitures over the life of the stock options. The market price of the common stock was $20 per share at the date of the grant. FAAC estimated the fair value of the options at $6 each. 3% of the options are forfeited during 2022 due to executive turnover. What amount should FAAC record as compensation expense for the year ended December 31, 2022, assuming FAAC chooses the option not to estimate forfeitures?
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