On January $1,2024,$ Farmer Fabrication issued stock options for $300,000$ shares to a division manager. The options have an estimated

fair value of $$7$ each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional

revenue increases by $3\%$ in three years. Suppose that Farmer initially estimates that it is not probable the goal will be achieved, but

then after one year, Farmer estimates that it is probable that divisional revenue will increase by $3\%$ by the end of $2026.$

Required:

What is the revised estimate of the total compensation?

What action will be taken to account for the options in $2025?$

Prepare the journal entries to record compensation expense in $2025$ and $2026.$

Complete this question by entering your answers in the tabs below.

Prepare the journal entries to record compensation expense in $2025$ and $2026.$

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Do not round

intermediate calculations. Round your final answers to the nearest whole dollar.