Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive...

60.1K

Verified Solution

Question

Accounting

Pastner Brands is a calendar-year firm with operations inseveral countries. As part of its executive compensation plan, atJanuary 1, 2021, the company issued 320,000 executive stock optionspermitting executives to buy 320,000 shares of Pastner stock for$44 per share. One-fourth of the options vest in each of the nextfour years beginning at December 31, 2021 (graded vesting). Pastnerelects to separate the total award into four groups (or tranches)according to the year in which they vest and measures thecompensation cost for each vesting date as a separate award. Thefair value of each tranche is estimated at January 1, 2021, asfollows:
Vesting Date Amount
Vesting Fair Value
per Option
Dec. 31, 2021 25 % $ 4.50
Dec. 31, 2022 25 % $ 5.00
Dec. 31, 2023 25 % $ 5.40
Dec. 31, 2024 25 % $ 6.00

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

Answer & Explanation Solved by verified expert

3.9 Ratings (625 Votes)

1 Vesting Dt 2021 2022 2023 2024 Dec 31 2021 360000 Dec 31 2022 200000 200000 Dec 31 2023 144000 144000 144000 Dec 31 2024 120000 120000 120000 120000 824000 464000 264000 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Vesting Date	Amount Vesting			Fair Value per Option
Dec. 31, 2021		25	%	$	4.50
Dec. 31, 2022		25	%	$	5.00
Dec. 31, 2023		25	%	$	5.40
Dec. 31, 2024		25	%	$	6.00