On January 1, 2018, Felix Austead Athletic Club (FAAC) Granted

question 43

Multiple Choice

On January 1, 2018, Felix Austead Athletic Club (FAAC) granted stock options to key executives exercisable for 500,000 shares of the company's common stock at $18 per share. The stock options are intended as compensation for the next four years. The options are exercisable within a four-year period beginning January 1, 2022, by the executives still in the employ of the company. No options were terminated during 2018, but the company anticipates 5% forfeitures over the life of the stock options. The market price of the common stock was $18 per share at the date of the grant. FAAC estimated the fair value of the options at $4 each. 1% of the options are forfeited during 2019 due to executive turnover. What amount should FAAC record as compensation expense for the year ended December 31, 2019, assuming FAAC chooses the option not to estimate forfeitures?

• A) $480,000.
• B) $500,000.
• C) $2,160,000.
• D) $2,250,000.

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Definitions:

Good Faith

The honest intent to act without taking an unfair advantage over another party in a transaction.

Good Title

Legal term referring to a person's rightful ownership of property, free of any liens, disputes, or legal questions.

Bad Check

A check that cannot be processed because the account on which it was drawn lacks sufficient funds.

Article 2

A section of the Uniform Commercial Code (UCC) that governs the sale of goods in the United States, detailing rights, obligations, and warranties in sales contracts.