Bolder Limited grants 1000 share options to each of its 80 employees. Each grant is conditional on the employee working for the company for the next two years. The fair value of each option is estimated to be $10.00 at grant date and $12.50 at vesting date. The amount to be recognised as an expense by Bolder Limited in year 2 is:
A) $400 000.
B) $800 000.
C) $200 000.
D) $1 000 000.

Question

Quizplus · Accepted Answer

Bolder Limited grants 1000 share options to each of its 80 employees, which is a total of 80,000 options. As each option has a fair value of $10.00 at grant date, the total cost is 80,000 x $10.00 = $800,000. However, this cost is spread over the two-year vesting period. Therefore, the cost to be recognized as an expense in year 2 is half of the total cost, which is $400,000. Therefore, the correct answer is C.

Bolder Limited Grants 1000 Share Options to Each of Its