On January $1,20$X$1,$ Clarkston Company initiated an employee stock$-$based compensation plan that grants employees options to purchase $80,000$ shares of $$0\mathrm{.}01$ par value common stock at $$4\mathrm{.}00$ per share. The employees$$ rights to the stock options vest over a two$-$year service period, from January $1,20$X$1$ to January $1,20$X$3.$ Clarkston estimates that these OPTIONS have a fair value of $$1\mathrm{.}00$ per share on the date of grant of January $1,20$X$1.$ The stock options are exercisable any time between January $1,20$X$3$ and December $31,20$X$3.$

Which ONE of the following should be included in the journal entry necessary on Clarkston$$s books on December $31,20$X$1,$ the end of the FIRST year of the stock$-$based compensation plan?

CREDIT Stock Option Liability for $$40,000$

DEBIT Compensation Expense for $$80,000$

CREDIT Stock Option Liability for $$80,000$

DEBIT Compensation Expense for $$40,000$