On January 1, 2018, Hugh Morris Comedy Club (HMCC) granted 1 million stock options to key executivesexercisable for 1 million shares of the company’s common stock at $20 per share. The stock options are intendedas compensation for the next three years. The options are exercisable within a four-year period beginningJanuary 1, 2021, by the executives still in the employ of the company. No options were terminated during 2018.The market price of the common stock was $25 per share at the date of the grant. HMCC estimated the fair valueof the options at $9 each. 1% of the options are forfeited during 2019 due to executive turnover. What amountshould HMCC record as compensation expense for the year ended December 31, 2019, assuming HMCCchooses the option to record forfeitures as they actually occur?
On January 1, 2018, Hugh Morris Comedy Club (HMCC) granted 1 million stock options to key executives
exercisable for 1 million shares of the company’s common stock at $20 per share. The stock options are intended
as compensation for the next three years. The options are exercisable within a four-year period beginning
January 1, 2021, by the executives still in the employ of the company. No options were terminated during 2018.
The market price of the common stock was $25 per share at the date of the grant. HMCC estimated the fair value
of the options at $9 each. 1% of the options are forfeited during 2019 due to executive turnover. What amount
should HMCC record as compensation expense for the year ended December 31, 2019, assuming HMCC
chooses the option to record forfeitures as they actually occur?
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