Question
Reginald Bank offered its Chief Investment Officer (CIO) 5,000 options to purchase company stock at $5/share on January 1, YEAR 1. The stock was selling
Reginald Bank offered its Chief Investment Officer (CIO) 5,000 options to purchase company stock at $5/share on January 1, YEAR 1. The stock was selling at the same price in the public market that day. Assume that Reginald Bank estimates the value of the options on the grant date is $10/share. The vesting period was 50 percent for YEAR 1 and 50 percent for YEAR 2. On December 31, YEAR 2, the stock was worth $7/share, but the CIO believed that stock prices were going up; so she waited until December 31, YEAR 3 to exercise all her options and turn around and sell the shares the same day when the stock price was $15/share.
Fill in the blank: If YEAR 1 is 2018, YEAR 2 is 2019, and YEAR 3 is 2020 and the above options are non-qualified stock options (NQOs), the amount of expense Reginald Bank will recognize in its income statement for financial reporting in 2020 is $______
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