On January 1, 2018, Marigold Corp. granted Sam Wine, an employee, an option to b
ID: 2557049 • Letter: O
Question
On January 1, 2018, Marigold Corp. granted Sam Wine, an employee, an option to buy 1,000 shares of Marigold Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $6060. Wine exercised his option on October 1, 2018 and sold his 1,000 shares on December 1, 2018. Quoted market prices of Marigold Co. stock in 2018 were:
The service period is for three years beginning January 1, 2018. As a result of the option granted to Wine, using the fair value method, Marigold should recognize compensation expense for 2018 on its books in the amount of
Explanation / Answer
Price per share on 01.01.2018 30 On 01.10.2018 Purchased 36 On 01.12.2018 Sold 40 Amortised Compensation expense per year - 6060/3 2020 Since, Wine sold all shares in same year, So Compensation expesne to be recognised in same year i.e. -6060 Wine exercised his option on 01.10.2018, revalues by 6 6000 Wine sold his share on 01.12.2018, revalues by 4 -4000 Compensation Expense to be recorded as -4060
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