Schmidt Electronics Offered an Incentive Stock Plan to Its Employees $\begin{array}{llcc} \text {Deferred Compensation } &54,000 \\ \text { Compensation Expense}&&54,000 \\\end{array}$

question 70

Multiple Choice

Schmidt Electronics offered an incentive stock plan to its employees. On January 1, Year 1, 90,000 options were granted for 90,000 $1 par common shares. The exercise price equals the $6 market price of the common stock on the grant date. The vesting period is 3 years. The options cannot be exercised before January 1, Year 4, and expire on December 31, Year 5. Each option has a value of $3 based upon an option pricing model. At the end of the first year, it is expected that 100% of employees will exercise the options. By the end of Year 2, it is expected that only 80% of the options will be exercised. Schmidt chooses to adjust the
Fair value of the options for the estimated forfeitures.
What is the journal entry to record compensation expense for year 2? (Do not round intermediate calculations. Only round your final answer to the nearest dollar.)

• A)
• \(\begin{array}{llcc}
• \text {Deferred Compensation } &54,000 \\
• \text { Compensation Expense}&&54,000 \\
• \end{array}\)
• B)
• \(\begin{array}{llcc}
• \text {Compensation Expense } &216,000\\
• \text { Deferred Compensation } &&216,000\\
• \end{array}\)
• C)
• \(\begin{array}{llcc}
• \text { Compensation Expense } &54,000\\
• \text { APIC - Stock Options }&&54,000 \\
• \end{array}\)
• D)
• \(\begin{array}{llcc}
• \text {Compensation Expense } &54,000 \\
• \text { Deferred Compensation } &&54,000\\
• \end{array}\)

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Peristalsis

The series of wave-like muscle contractions that moves food through the digestive tract.

Starch Digestion

The process by which the body breaks down starch into simpler sugars, primarily through the action of enzymes like amylase.

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Sensations created when a chemical stimulus is applied to the taste receptors in the tongue.

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Muscles located within the structure being moved.