CHAPTER 19 (10.)

Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1, 2018, the company issued 320,000 executive stock options permitting executives to buy 320,000 shares of Pastner stock for $44 per share. One-fourth of the options vest in each of the next four years beginning at December 31, 2018 (graded vesting). Pastner elects to separate the total award into four groups (or tranches) according to the year in which they vest and measures the compensation cost for each vesting date as a separate award. The fair value of each tranche is estimated at January 1, 2018, as follows:

Vesting Date	Amount Vesting			Fair Value per Option
Dec. 31, 2018		25	%	$	4.50
Dec. 31, 2019		25	%	$	5.00
Dec. 31, 2020		25	%	$	5.40
Dec. 31, 2021		25	%	$	6.00

Required: 1. Determine the compensation expense related to the options to be recorded each year 20182021, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately.

Required 1 Required 2 Determine the compensation expense related to the options to be recorded each year 2018-2021, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately. (Enter your answers in thousands.) Compensation Expense in: 2019 2020 2021 Total 360,000 Shares Vesting at: Dec. 31, 2018 Dec. 31, 2019 Dec. 31, 2020 Dec. 31, 2021 Total 400,000 2018 360,000 200,000 $ 144,000 120,000 824,000 $ 432,000 200,000 144,000 $ 120,000 464,000 S 144,000 120,000 $ 264,000 $ 120,000 $ 120,000 480,000 $1,672,000 $