Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1, 2024, the company issued 400,000 executive stock options permitting executives to buy 400,000 shares of Pastner stock for $30 per share. One-fourth of the options vest in each of the next four years beginning at December 31, 2024 (graded vesting). Pastner elects to separate the total award into four groups (or tranches) according to the year in which they vest and measures the compensation cost for each vesting date as a separate award as given below. Vesting Date Amount Vesting December 31, 2024 25% December 31, 2025 25% December 31, 2026 25% 25% December 31, 2027 Assume Pastner measures the fair value of all options on January 1, 2024, to be $6.60 per option using a single weighted-average expected life of the options assumption. Required: 1. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately. 2. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner uses the straight-line method to allocate the total compensation cost.
Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1, 2024, the company issued 400,000 executive stock options permitting executives to buy 400,000 shares of Pastner stock for $30 per share. One-fourth of the options vest in each of the next four years beginning at December 31, 2024 (graded vesting). Pastner elects to separate the total award into four groups (or tranches) according to the year in which they vest and measures the compensation cost for each vesting date as a separate award as given below. Vesting Date Amount Vesting December 31, 2024 25% December 31, 2025 25% December 31, 2026 25% 25% December 31, 2027 Assume Pastner measures the fair value of all options on January 1, 2024, to be $6.60 per option using a single weighted-average expected life of the options assumption. Required: 1. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately. 2. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner uses the straight-line method to allocate the total compensation cost.
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter15: Shareholders’ Equity: Capital Contributions And Distributions
Section: Chapter Questions
Problem 17E
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Transcribed Image Text:4:33
Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1,
2024, the company issued 400,000 executive stock options permitting executives to buy 400,000 shares of Pastner stock for $30 per
share. One-fourth of the options vest in each of the next four years beginning at December 31, 2024 (graded vesting). Pastner elects to
separate the total award into four groups (or tranches) according to the year in which they vest and measures the compensation cost
for each vesting date as a separate award as given below.
Vesting Date
Amount
Vesting
December 31, 2024
25%
December 31, 2025
25%
December 31, 2026
S
December 31, 2027
25%
25%
Assume Pastner measures the fair value of all options on January 1, 2024, to be $6.60 per option using a single weighted-average
expected life of the options assumption.
Required:
1. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates
the compensation cost for each of the four groups (tranches) separately.
2. Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner uses the
straight-line method to allocate the total compensation cost.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Determine the compensation expense related to the options to be recorded each year 2024-2027, assuming Pastner allocates
the compensation cost for each of the four groups (tranches) separately.
Note: Enter your answers in whole dollars.
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