Question

Knowledge Check 01 On January 1, Year 1, Abbott Company granted 92,000 stock options to certain executives. The options are exercisable no sooner than December 31, Year 3, and expire on January 1, Year 7. Each option can be exercised to acquire one share of $1 par common stock for $14. An option-pricing model estimates the fair value of the options to be $5 on the date of grant. What is the amount of compensation expense for Year 1

Answer 1

Answer:

$153,333

Explanation:

Calculation to determine What amount should Olympic recognize as compensation expense for 2016

Using this formula

Compensation expense =Total compensation/Vesting period

Let plug in the formula

Compensation expense=($5 x 92,000)/3 years

Compensation expense=$460,000/3 years

Compensation expense=$153,333

Therefore What amount should Olympic recognize as compensation expense for 2016 is $153,333