On January 1, 2021, Oliver Foods issued stock options for 44,000 shares to a division manager. The options have an estimated fair value of $3 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Oliver Foods' stock price increases by 5% in four years. Oliver Foods initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in each of the next four years

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Business

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10 July, 01:35

On January 1, 2021, Oliver Foods issued stock options for 44,000 shares to a division manager. The options have an estimated fair value of $3 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Oliver Foods' stock price increases by 5% in four years. Oliver Foods initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in each of the next four years

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Answers (1)

Know the Answer?

Jaden · Answer 1

Options:

A. $77,500

B. $19,500

C. No effect

D. $77,000

Answer:

The correct answer is option (D)

$77,000

Explanation:

Compensation will be recorded in each of the next four years

= (44,000*7) / 4 = $77,000