Required:  24. Compute the cumulative compensation expense for years 1,2, and 3. 25. At the end of year 2, Compute the amount the entity should report as share option outstanding.

At the beginning of year 1, Bad Blood Company grants share option to each of its 100 employees working 
in the sales department. The share option will vest at the end of year 3, provided that the employees 
remain in the entity’s employ, and provide that the volume of sales of the product increases by an average 
of between 5 percent per year. If the volume of sales of the product increases by an average of between 
5 percent and 10 percent per year, each employee will receive 100 share options. If the volume of sales 
increases by an average of between 11 and 15 percent each year, each employee will receive 200 share 
options. If the volume of sales increases by an average of 16% or more, each employee will receive 300 
share options.

On grant date, Bad Blood Company estimates that the share options have a fair value of 20 per option. 
Bad Blood Company also estimates that the volume of sales of the product will increase by an average of 
between 11 percent and 15 percent per year, and therefore expects that, for each employee who remains 
in service until end of year 3, 200 share options will vest. The entity also estimates, on the basis of a 
weighted average probability, that 20 percent of employees will leave before the end of year 3.

By the end of year 1, seven employees have left and the entity still expects that a total of 20 employees 
will leave by the end of year 3. Hence, the entity expects that 80 employees will remain in service for the 
three-year period. Product sales have increased by 12 percent and the entity expects this rate of increase 
to continue over the next 2 year

By the end of year 2, a further five employees have left, bringing the total to 12 to date. The entity now 
expects only three more employees will leave during year 3, and therefore expects a total of 85 employees 
will remain at the end of year 3. Product sales have increased by 20 percent, resulting in an average of 
16% over the two years to date. The entity now expects that the sales will average 16% or more over the 
3-year period, and hence expects each sales employee to receive 300 share options at the end of year 3.

By the end of year 3, a further two employees have left. Hence, 14 employees have left during the 3-year 
period, and 86 employees remain. The entity’s sales have increased by an average of 16% over the three 
years.

Based on the preceding information, answer the following:
Required: 
24. Compute the cumulative compensation expense for years 1,2, and 3.
25. At the end of year 2, Compute the amount the entity should report as share option outstanding.