On January 1, 2018, Brainstorm Corporation granted 40 million incentive stock op
ID: 341133 • Letter: O
Question
On January 1, 2018, Brainstorm Corporation granted 40 million incentive stock options to division managers, each permitting holders to purchase one share of the company’s $1 par common shares within the next six years, but not before December 31, 2021 (the vesting date). The exercise price is the market price of the shares on the date of grant, currently $25 per share. The fair value of the options, estimated by an appropriate option pricing model, is $6 per option. Unexpected turnover during 2019 caused the forfeiture of 5% of the stock options. What amount should Brainstorm recognize as compensation expense for 2019 after this unexpected event?
a) $50 million
b) $54 million
c) $58 million
d) $62 million
Explanation / Answer
Total compensation=40mn*6=240mn
5% forteified so reviseds is =95%*240*10^6=228mn
what they should have received at end of 2019=(228/4)*2=114mn
Already recorded=(240/4)=60mn
compensation expense=114-60=54
it is option B
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