What is the compensation expense that big lion would record

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On January 1, 2021, Big Lion issued 1 million executive stock options permitting executives to buy 1 million shares of stock for $15 per share. 12% of the options vest in 2021, 24% in the 2022, 14% in 2023, 10% in 2024, and 15% in 2025. The value of the options that vest over the 5- year period is estimated at January 1, 2021, by separating the total award into 5 groups (or tranches) according to the year in which they vest (because the expected life for each group differs).

The fair value of the options as of January 1, 2021, is estimated as follows:

Vesting Date         FV Per Option
2021                      $ 2.00
2022                    $ 3.00
2023                   $ 3.50
2024                    $ 4.00
2025                    $ 5.00

Required:

Problem 1) What is the compensation expense that Big Lion would record in 2022 associated with these options if Big Lion does not use the straight-line method?

Problem 2) What is the compensation expense that Big Lion would record in 2022 associated with these options if Big Lion does use the straight-line method?

Reference no: EM132763695

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