Refer to the situation described in BE 19-8. Suppose that after one year, Farmer estimates that it is not probable that divisional revenue will increase by 5% in three years. What action will be taken to account for the options in 2019?
BE 19-8
On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in each of the next three years?