On January 1, 2018, Hugh Morris Comedy Club (HMCC) granted 1 million stock options to key executives exercisable for 1 million shares of the company's common stock at $20 per share. The stock options are intended as compensation for the next three years. The options are exercisable within a four-year period beginning January 1, 2021, by the executives still in the employ of the company. No options were terminated during 2018. The market price of the common stock was $25 per share at the date of the grant. HMCC estimated the fair value of the options at $9 each. 1% of the options are forfeited during 2019 due to executive turnover.

What amount should HMCC record as compensation expense for the year ended December 31, 2019, assuming HMCC chooses the option to record forfeitures as they actually occur?

Compensation expense 2019 = $2,940,000

Step 1: Compensation expense per year = $3,000,000 (9*1000000/3)

Step 2: Now, we have to include 1% forfeitures = 2,940,000 (9,000,000*99%*2 divide this by 3) - $3,000,000.

1. My question is the "2" why do we multiply this by "2" = for year 2018 & 2019 (2 years)?
2. Also, why do we subtract this by $3,000,000?

Thank You