On January 1, 2024, Blue Incorporated issued stock options for 340,000 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 4% in three years. Blue initially estimates that it is not probable the goal will be achieved, but in 2025, after one year, Blue estimates that it is probable that divisional revenue will increase by 4% by the end of 2026. Ignoring taxes, what is the decrease in earnings in 2025? Multiple Choice $340,000 $680,000 $1,020,000 $1,360,000
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- On January 1, 2018, Black Inc. issued stock options for 200,000 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 6% in three years. Black initially estimates that it is probable the goal will be achieved. In 2019, after one year, Black estimates that it is not probable that divisional revenue will increase by 6% in three years. Ignoring taxes, what is the effect on earnings in 2019? $200,000 decrease $200,000 increase O $400,000 increase O No effectOn January 1, 2021, 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 2021, 2022, 2023?On October 1, 2024, Halsey Company issued stock options for 300,000 shares to a division manager. The options have an estimated fair value of $3 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 6% in three years. Halsey initially estimates that it is probable the goal will be achieved. How much compensation will be recorded in each of the next three years? A.$0 B.$100,000 C.$300,000 D.$900,000
- On January 1, 2021, 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. 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 2023. Required:1. What is the revised estimate of the total compensation?2. What action will be taken to account for the options in 2022?3. Prepare the journal entries to record compensation expense in 2022 and 2023. 1. Estimate total compensation $600,000 2. What action will be taken to account for the options in 2022? Farmer will reflect the cumulative effect on compensation in 2022 earnings. Record compensation expense for 2022 and 2023.…On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. Theoptions have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, theoptions are not exercisable unless divisional revenue increases by 5% in three years. Farmer initially estimatesthat it is probable the goal will be achieved. How much compensation will be recorded in each of the next threeyears?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. Suppose that after one year, Farmer estimates that it is not probable that divisional revenue will increase by 5% in three years. Required: What is the revised estimate of the total compensation? What action will be taken to account for the options in 2025? What journal entry will be needed to account for the options in 2025?
- On October 1, 2016, 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 each of the next three years?On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. Theoptions have an estimated fair value of $6 each. To provide additional incentive for managerial achievement,the options are not exercisable unless Farmer Fabrication’s stock price increases by 5% in three years. Farmerinitially estimates that it is not probable the goal will be achieved. How much compensation will be recorded ineach of the next three years?On October 1, 2016, 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 Farmer Fabrication’s stock price increases by 5% in three years. Farmer initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in each of the next three years?
- On January 1, 2021, Farmer Fabrication issued stock options for 280,000 shares to a division manager. The options have an estimated fair value of $5 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Farmer Fabrication’s stock price increases by 2% in three years. Farmer initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in 2021, 2022, and 2023?On Jan. 1, 2020, Hufflepuff Industries, Inc. issues stock options for 100,000 shares to a regional manager. The options have an estimated fair value of $6 each. The provide additional incentive for the manager's achievement, the options are not exercisable unless the region revenue increase by 8% in three years. Hufflepuff initially estimates that it is probable that the goal will be achieved. How much compensation will be recorded in 2020, 2021, and 2022, the vesting period?On Jan. 1, 2020, Hufflepuff Industries, Inc. issues stock options for 100,000 shares to a regional manager. The options have an estimated fair value of $6 each. The provide additional incentive for the manager's achievement, the options are not exercisable unless the region revenue increase by 8% in three years. Because the manager when to Ravenclaw College, Hufflepuff initially estimates that the incompetent manager will not achieve the goal. Surprisingly, in year three, the manager meets the 8% increase. How much compensation will be recorded in 2022?