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. How much compensation will be recorded each year 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. How much compensation will be recorded each year in 2020, 2021, and 2022, the vesting period?
Chapter22: S Corporations
Section: Chapter Questions
Problem 14DQ
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I got the question in the photo wrong. I had different sources work on this problem and they came up with two answers: $0 and $200,000. I went with $200,000 b/c I had the exact same problem before, except the company said the likelihood of the manager achieving the goal was “probable”, and the answer was $200,000. So, the ONLY difference between the two problems was the company’s opinion on whether or not the manager would succeed. Is the correct answer, in fact, zero? If so, why?
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