My book states: \" if an employee forfeits a stock option because the employee f

Question

My book states:

" if an employee forfeits a stock option because the employee fails to satisfy a service requirement (e.g., leaves employment), the company should adjust the estimate of compensation expense recorded in the current period (as a change in estimate). A company records this change in estimate by debiting Paid-in Capital—Stock Options and crediting Compensation Expense for the amount of cumulative compensation expense recorded to date (thus decreasing compensation expense in the period of forfeiture)"

I am confused by the wording and wondering if I am dr./cr. the entire estimated amount or just the amount of the failed amount of options?

Explanation / Answer

Answer: the entire estimated amount

" if an employee forfeits a stock option because the employee fails to satisfy a service requirement (e.g., leaves employment), the company should adjust the estimate of compensation expense recorded in the current period (as a change in estimate). A company records this change in estimate by debiting Paid-in Capital—Stock Options and crediting Compensation Expense for the amount of cumulative compensation expense recorded to date (thus decreasing compensation expense in the period of forfeiture)"

Than you Debit or Credit just the amount of the failed amount of options.

This entry decreases Compensation expense in the period of forfeiture.

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