Answer:
Option D. $50,000.
Explanation:
We can solve it by two methods:
Method 1: Conceptually
The 30,000 stock options has vested period of 3 years, which means 10,000 stock options a year. Furthermore, according to accrual concept application in the employee benefits international standard on accounting, the increase in liability for compensating other party for its services is increase in expense. Here, increase in expense is the option fair value which is $5. So the Compensation expense is:
Compensation expense = $5 per stock option * 10,000 Stock Options per year
= $50,000 for the first year 2018
Method 2: Formula Method
As we know that:
Compensation expense for 2018 = Total compensation / Vested period
Here
Total compensation = $5 stock option * 30,000 options
Vested period is 3 years
By putting values, we have:
Compensation expense = (30,000 × $5)/3 years
Compensation expense = $50,000
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