FX Services Granted 15 Million of Its $1 Par Common

Multiple Choice

FX Services granted 15 million of its $1 par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $8 per share on the grant date. Ignoring taxes, what is the effect on earnings in the year after the shares are granted to executives?

A) $ 0
B) $ 15 million
C) $ 40 million
D) $120 million The $120 million total compensation is expensed equally over the three-year vesting period, reducing earnings by $40 million each year.