Refer to the situation described in BE 198. Suppose that after one year, Farmer estimates that it
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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 journal entry will be needed to account for the options in 2025?
Data from in BE 19-8
On January 1, 2024, 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 2024, 2025, 2026?
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