ABC Company issues 500 common stock options to eligible employees on January 1, year 1. The stock has a $1 par value and the market price at issuance is $10 per share. The employees must work 2 years before exercising their options at $12 per share, and the options expire in 4 years. The market price in 4 years is projected to be $15 per share. An acceptable option pricing model values the options at $6 each at issuance.

How much compensation expense will ABC record for year 1?

Answer rating: 100% (QA)

To determine the compensation expense for year 1 we need to use the fair value of ... View the full answer