On January 1, 2024, Wendy Day Company granted stock options to key executives exercisable for 500,000 shares of the company's common stocka On October 1, 2024, lona Bell Company issued stock options for 300,000 shares to a division manager. The options have an estimated fair value of $3 $18 per share. The stock options are intended as compensation for the next four years. The options are exercisable within a four-year period bed each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 6% in three January 1, 2028, by the executives still in the emplo forfeitures over the life of the stock options. The market price in the employ of the company. No options were terminated during 2024, but the company anticipateaimto years. Bell initially estimates that it is not probable the goal will be achieved, but then after one year, Bell estimates that it is probable that divisional. price of the common stock was $18 per share at the date of the grant. W dy Day estimated t revenue will increase by 6% by the end of 2026. Bell will record compensation expense of: fair value of the options at $4 each. 1% of the options are forfeited during 2025 due to executive turnover. What amount should Wendy Day record as compensation expense for the year ended December 31, 2025, assuming the company chooses to estimate forfeitures? Multiple Choice Multiple Choice $300,000 in 2025 and $300,000 in 2026. $495,000 $600,000 in 2025 and $300,000 in 2026. $500,000 zero in 2025 and in 2026. $520,000 $450,000 in 2025 and $450,000 in 2026. $475,000 Trafford Company is a calendar-year U.S. firm with operations in several countries. At January 1, 2024, the company had issued 40,000 executive stock options permitting executives to buy 40,000 shares of stock for $25. The vesting schedule is 20% the first year, 30% the second year, and 50% the third noose to account for the options on a straight-line basis. The fair value of the options is estimated as follows: On January 1, 2024, Black Incorporated issued stock options for 200,000 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 6% in three Amount Fair Value Black initially estimates that it is probable the goal will be achieved. In 2025, after one year, Black estimates that it is not probable that divisional Vesting Date Vesting per Option revenue will increase by 6% in three years. Ignoring taxes, what is the effect on earnings in 2025? amber $1, 506% 20% December 31, 2 30% December 31, 2026 50% $ 12 Multiple Choice What is the compensation expense related to the options to be recorded in 2025? $200,000 increase Multiple Choice No effect $128,000 $400,000 increase $140,000 $200,000 decrease $96,000 $48,000 Yu Company is a calendar-year U.S. firm with operations in several countries. At January 1. 2024, the company had issued 40.090 options permitting executives to buy 40,000 shares o year ( graded-vesting) . TH ded-vesting). The fair value of the options is estimated as follows, 20% the first year, 30% the second year, and 50% the third Amount Fair Value On January 1, 2024, Cori Ander Herbs granted restricted stock units (RSUs) representing 300,000 of its $1 par common shares to executives, subject to Vesting Date Vesting per Option forfeiture if employment is terminated within three years. After the recipients of the RSUs satisfy the vesting requirement, the company will distribute the er share on the grant date . At the date of gra December 31, 2024 shares. The common shares had a market price of $12 per share on the December 31, 2025 recipients would leave the firm prior to vesting. In 2025, 2% of the options are forfeited due to executive turnover. The company chooses December 31, 2026 50% $ 12 to estimate forfeitures. What amount should the company record as compensation expense for the year ended December 31, 2025? Assuming Yu uses the straight-line method, what is the compensation expense related to the options to be recorded in 2025? Multiple Choice Multiple Choice $1,200,000 $400,000 O $94,000 O $130 , 667 O $1,152,000 $333,333 O $1,128,000 $200,000
