Exercise 1-7

On January 1, 2021, a company granted stock options for 740 shares of its $14 par value common stock to its key employees. Each option entitles the employees to purchase one share of common stock at $26. The Black-Scholes option pricing model determines total compensation expense to be $32,000. The options are exercisable within a 2-year period beginning January 1, 2024.

The amount of compensation expense that should be recorded for 2021 under the fair value method is $_________. (Round to the nearest dollar, if necessary.)