On January 1, Year 1, Gallagher Corporation Issued 700,000 Stock

question 65

Multiple Choice

On January 1, Year 1, Gallagher Corporation issued 700,000 stock options for 700,000 shares to a division manager. The options have an estimated fair value of $10 each. These options are not exercisable unless division revenue increases by 8% in four years. Gallagher estimates that it is probable that the goal will be achieved. What is pretax compensation expense for year 1?

• A) $0
• B) $1,750,000
• C) $2,333,333
• D) $7,000,000

---

Definitions:

Accumulated Depreciation

The total depreciation of an asset that has been charged to expense since the asset was acquired and put into use.