Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1, 2016, the company issued 440,000 executive stock options permitting executives to buy 440,000 shares of Pastner stock for $36 per share. One-fourth of the options vest in each of the next four years beginning at December 31, 2016 (graded vesting). Pastner elects to measure the fair value of all options on January 1, 2016, to be $4.80 per option (tranche) using a single weighted-average expected life of the options assumption Required
1. Determine the compensation expense related to the options to be recorded each year 2016-2019 assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately Shares Compensation Expense Recorded in 2016 2017 2018 2019 Vesting at Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2019 Total
2. Determine the compensation expense related to the options to be recorded each year 2016-2019 assuming Pastner uses the straight-line method to allocate the total compensation cost.
2016 2017 2018 2019 Total
Compensation expense $ 0