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19 September, 02:31

On January 1, 2021, Oliver Foods issued stock options for 44,000 shares to a division manager. The options have an estimated fair value of $3 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Oliver Foods' stock price increases by 5% in four years. Oliver Foods initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in each of the next four years

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  1. 19 September, 03:00
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    Options:

    A. $77,500

    B. $19,500

    C. No effect

    D. $77,000

    Answer:

    The correct answer is option (D)

    $77,000

    Explanation:

    Compensation will be recorded in each of the next four years

    = (44,000*7) / 4 = $77,000
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