Go from the other way. Think of accumulated expense. I really suck at explaining, but if it doesn't make sense I can try again lol. I definitely thought the same thing, but on second look they are right. I tried to add in a bunch of methods I started to get as I was typing this too lol:
***Whatever happens, the corrections gotta be made in 07, you don't wanna reallocate the prior year's expired expenses to future years: So 08's gotta expense has gotta be $14500 [(2900 shares*$20)/4].
You know total expense has gotta equal value of options to be issued: 2900*$20 = $58K **I may have referred to options in stock later, just know what I mean =P Too lazy to edit.
So if you did C: which was my first thought as well: you'd have expensed in total [15K+15K+14.5K+14.5K) = 59K total.
If you did A: you'd have a total expense of 58.5K [15K+15K+14K+14.5K]
Now if you “want” you could backwards too, but it's a little more difficult that way, because you just gotta know when you start with the unadjusted expense, you have to start with the right amount that “can” be expensed, i.e. 14.5K
Now, cprv, what you did was also something I did on try #2: You nailed it on the -1K fix(or at least I think you did), but you started with an initial expense of 15K(which no longer applies), when you shoulda started with 14.5K(for the same reason 08's expense has “gotta” be 14.5K). So it's (14.5K-1K)
Or…the worst method, in my opinion: Start with 15K, as you did. The tricky part is noticing that $500 of the required $2000 adjustment is apportioned to to '08. That means $1500 must be apportioned to 07. So it's $15K-1.5K.
Correct answer:
Now if you do D you'd have a total expense of $58K [15K+15K+13.5K+14.5K]
Key is knowing 08's gotta be 14.5K, and that yearly expense is an allocation of shares to be issued.
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