Refer to the situation described in BE 198. Suppose that Farmer initially estimates that it is not

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Refer to the situation described in BE 19–8. Suppose that Farmer initially estimates that it is not probable the goal will be achieved, but then after one year, Farmer estimates that it is probable that divisional revenue will increase by 5% by the end of 2026. What journal entry(s) will Farmer record to account for the options in 2025 and thereafter?


Data from in BE 19-8

On January 1, 2024, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in 2024, 2025, 2026?

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