On January 1, 2013, Blue Inc. issued stock options for 200,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 6% in three years. Blue initially estimates that it is not probable the goal will be achieved, but in 2014, after one year, Blue estimates that it is probable that divisional revenue will increase by 6% by the end of 2015. Ignoring taxes, what is the effect on earnings in 2014?

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The Answer of On January 1, 2013, Blue Inc. issued stock options for 200,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 6% in three years. Blue initially estimates that it is not probable the goal will be achieved, but in 2014, after one year, Blue estimates that it is probable that divisional revenue will increase by 6% by the end of 2015. Ignoring taxes, what is the effect on earnings in 2014?