On January 1, 2018, M Company granted 94,000 stock options to certain executives

Question

On January 1, 2018, M Company granted 94,000 stock options to certain executives. The options are exercisable no sooner than December 31, 2020, and expire on January 1, 2024. Each option can be exercised to acquire one share of $1 par common stock for $10. An option-pricing model estimates the fair value of the options to be $4 on the date of grant. If unexpected turnover in 2019 caused the company to estimate that 10% of the options would be forfeited, what amount should M recognize as compensation expense for 2019? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Explanation / Answer

Stock option value (94000*4) 376000 Options exercised 90% 338400 338400*2/3 225600 Less recog in 2018 376000/3 125333.33 Compensation expense recog in 2019 100267

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