Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1, 2021, the company issued 480,000 executive stock options permitting executives to buy 480,000 shares of Pastner stock for $33 per share. One-fourth of the options vest in each of the next four years beginning at December 31, 2021 (graded vesting). Pastner elects to measure the fair value of all options on January 1, 2021, to be $4.80 per option (tranche) using a single weighted-average expected life of the options assumption.

Determine the compensation expense related to the options to be recorded each year 2021-2024 assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately

Stock option gives a right to employee to buy an amount of company stock at a given price in specified time period. It is charged as expense according to the fair value of the stock option every year until exercise-able date.

Compensation expense of $510,000 will be recorded each year 2021-2024

All the working is made in an MS Excel file and answer is made accordingly. Please find it.

Answer Link