On January 1, 2009, D Corp

question 40

Multiple Choice

On January 1, 2009, D Corp. granted an employee an option to purchase 6,000 shares of D's $5 par common stock at $20 per share. The options became exercisable on December 31, 2010, after the employee completed two years of service. The option was exercised on January 10, 2011. The market prices of D's stock were as follows: January 1, 2009, $30; December 31, 2010, $50; and January 10, 2011, $45. An option pricing model estimated the value of the options at $8 each on the grant date. For 2009, D should recognize compensation expense of:

• A)$ 0.
• B)$24,000.
• C)$30,000.
• D)$90,000.The total compensation is $48,000, the option model price of $8 each times the number of options, 6,000.Since the service period is two years, the compensation expense for 2009 is $24,000 ($48,000/2 years).