On January 1 2018 G Corp granted stock options to key employ

On January 1, 2018, G Corp. granted stock options to key employees for the purchase of 80,000 shares of the company\'s common stock at $25 per share. The options are intended to compensate employees for the next two years. The options are exercisable within a four-year period beginning January 1, 2020, by the grantees still in the employ of the company. No options were terminated during 2018, but the company does have an experience of 4% forfeitures over the life of the stock options. The market price of the common stock was $31 per share at the date of the grant. G Corp. used the Binomial pricing model and estimated the fair value of each of the options at $10. What amount should G charge to compensation expense for the year ended December 31, 2018?

Solution

Total compensation 80000 options* 10 each 800000 100-4 = 96% 768000 Compensation for two years 384000 G charge to compensation expense for the year ended December 31, 2018 384000