Pastner Brands is a calendar-year firm with operations inseveral countries. As part of its executive compensation plan, atJanuary 1, 2021, the company issued 320,000 executive stock optionspermitting executives to buy 320,000 shares of Pastner stock for$44 per share. One-fourth of the options vest in each of the nextfour years beginning at December 31, 2021 (graded vesting). Pastnerelects to separate the total award into four groups (or tranches)according to the year in which they vest and measures thecompensation cost for each vesting date as a separate award. Thefair value of each tranche is estimated at January 1, 2021, asfollows:
| Vesting Date | Amount
Vesting | Fair Value
per Option |
| Dec. 31, 2021 | | 25 | % | $ | 4.50 | |
| Dec. 31, 2022 | | 25 | % | $ | 5.00 | |
| Dec. 31, 2023 | | 25 | % | $ | 5.40 | |
| Dec. 31, 2024 | | 25 | % | $ | 6.00 | |
|
Required:
1. Determine the compensation expense related tothe options to be recorded each year 2021–2024, assuming Pastnerallocates the compensation cost for each of the four groups(tranches) separately.
2. Determine the compensation expense related tothe options to be recorded each year 2021–2024, assuming Pastneruses the straight-line method to allocate the total compensationcost.
