Refer to the situation described in P 19–2. Assume Pastner measures the fair value of all options on January 1, 2021, to be $4.50 per option using a single weighted-average expected life of the options assumption.

Required:
1. Determine the compensation expense related to the options to be recorded each year 2021–2024, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately.
2. Determine the compensation expense related to the options to be recorded each year 2021–2024, assuming Pastner uses the straight-line method to allocate the total compensation cost.

P 19–2

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Vesting Date Amount Vesting Fair Value per Option Dec. 31, 2021 25% $3.50 Dec. 31, 2022 25% $4.00 Dec. 31, 2023 25% $4.50 Dec. 31, 2024 25% $5.00