On January 1, Year 1, Fields Corporation Granted 500,000 Stock

question 17

Multiple Choice

On January 1, Year 1, Fields Corporation granted 500,000 stock options to certain executives. The options are exercisable no sooner than December 31, Year 3 and expire on January 1, Year 7. The vesting period is 3 years. Each option can be exercised to acquire one share of $10 par common stock for $15. An appropriate option-pricing model estimates the fair value of each option to be $12 on the date of grant. What amount should Fields recognize as compensation expense for Year 1?

• A) $0
• B) $2,000,000
• C) $750,000
• D) $6,000,000

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Definitions:

Mnemonic

A technique used to improve memory, often by making information easier to remember through the use of a pattern, phrase, or association.

Incidental Learning

The process of acquiring knowledge unintentionally or without conscious effort during an activity not specifically designed for learning.

Latent Learning

Learning that occurs without apparent reinforcement but is not demonstrated until an incentive is provided.

Traumatic Amnesia

Memory loss following a traumatic event, where the individual may be unable to recall important personal information or details of the trauma.