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On October 1, 2016, Farmer Fabrication issued stock options for 120,000 shares to a division...

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Accounting

On October 1, 2016, Farmer Fabrication issued stock options for 120,000 shares to a division manager. The options have an estimated fair value of $4 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 2% in three years. Suppose that Farmer initially estimates that it is not probable the goal will be achieved, but then after one year, Farmer estimates that it is probable that divisional revenue will increase by 2% by the end of 2018.

The revised estimate of Total Compensation is $480,000

1. Prepare the journal entries to record compensation expense in 2017 and 2018

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