Question

13
Company A has 800 employees, and it decides to grant each of the employees 50 share options as
part of its new rewards plan. The options are exercisable over 5 years and subject to a 3-year
service condition. The fair value of each option at the grant date is $16. The company estimates
that 80% of its employees will meet the service condition required for receiving the options.
Calculate the total share-based payment expense for Company A assuming that 80% of the
employees actually meet the service condition.

$512,000
$853,333
$341,333
$170,667

Answer 1

Option A. The total share expense that the company would share would be given as 512,000

What is meant by share expense?

These are the necessary expenses that are needed for the smooth functioning of a particular business that are not within the confinement of the O and M agreement. It has to do with shared facilities.

How to solve for the share expense

The total number of the employees that are knwon to satistfy condition are given as

800 * 0.8

= 640

The options that are estmated that would be exercised

This is given as the employees * share option

= 640×50

=32000.

The total shae for the company would be gotten as

= 32000× $16

This gives us $512,000.

Hence it can be concluded that the total share of the company if they have 80 percent meeting the condition is $512000.

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