Case 07-4 Murray Compensation, Inc. Murray Compensation, Inc. (Murray), an SEC registrant that provides payroll processing and benefit administration services to other companies, granted 100,000 at-the-money employee share options on January 1, 2010. The awards have a grant-date fair value of $6, vest at the end of the third year of service (cliff-vesting), and have an exercise price of $21. Subsequent to the awards being granted, the stock price has fallen significantly. On January 1, 2012, Murray decreased the exercise price on the stock options to $12. This downward adjustment to the exercise price was made in order to ensure that the options continue to provide intended motivational benefit to employees. However, in addition to the reduction in the exercise price, Murray also changed the vesting terms, such that the employees must provide an additional two years of service (awards will now vest on January 1, 2015). Immediately prior to the reduction in the exercise price of the awards, the fair value was $1 per award. After considering the impact of the January 1, 2012, re-pricing, the fair value was $4 per award. Required: Calculate the amount of compensation cost that should be recognized by Murray in the years ended December 31, 2012, 2013, and 2014. Assume that there have been no forfeitures and that Murray uses a straight-line approach for recognizing compensation cost.

FACTS
			GRANT DATE		GRANT DATE FAIR VALUE		VESTING PERIOD (YEARS)		VESTING DATE
ORIGINAL AWARD			1/1/10		6		3		1/1/13
MODIFIED AWARD			1/1/12		4		3		1/1/15

1. Account for the original award and the modified award independently. Such that the original reaming unvested compensation cost will be accounted for under the original vesting terms and the incremental compensation cost related to the modified award will be recognized from the date of the modification to the end of the extended service period.

YEAR ENDED			2012	2013	2014
ORIGINAL AWARD
MODIFIED AWARD
TOTAL COMPENSATION

2. Combine the original award and the modified award on the basis that the remaining unvested compensation cost from the original award and incremental compensation from the new award should be accounted for together over the modified remaining serviced period.

YEAR ENDED			2012	2013	2014
TOTAL COMPENSATION

Show all calculations in excel please.