/ledugen.wileyplus.com/edugen/student/mainfr.uni Kieso, Int INTERMEDTATE ACCOUNT
ID: 2550019 • Letter: #
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/ledugen.wileyplus.com/edugen/student/mainfr.uni Kieso, Int INTERMEDTATE ACCOUNTING (ACCT 372/373/32 :11:59 PM/Remaining:1824 min NEXT Question 1 On January 1, 2018, Waterway Industries granted Sam Wine, an employee, an option to buy 1,000 shares of Waterway Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation nse is determined to be $6600. Wine exercised his option on October 1, 2018 and sold his 1,000 shares on December 1, 2018. Quoted market prices of Waterway Co. stock in 2018 were: July 1 October 1 December 1 $32 per share $38 per share $42 per share The service period Waterway should recognize compensation expense for 2018 on its books in the amount of is for three years beginning January 1, 2018. As a result of the option granted to Wine, using the fair value method, $6600 O $1650. O so. O $2200 Click if you would like to Show Work for this question: Qpen Show Work By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructorExplanation / Answer
The correct option is " D " i.e. $2200
Under the fair value method , compensation expense is recognized over the service period ( the time between the date of grant Grant and vesting date ) .
Since total compensation determined to be $6600 and the service period is of 3 years , the compensation expense for 2018 on it's book should be $2200 i.e. ( $6600/ 3 years )
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