Question
On January 1, 2014, Ellison Company granted Sam Wine, an employee, an option to buy 1,000 shares of Ellison Co. stock for $30 per share,
On January 1, 2014, Ellison Company granted Sam Wine, an employee, an option to buy 1,000 shares of Ellison Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $4,500. Wine exercised his option on October 1, 2014 and sold his 1,000 shares on December 1, 2014. Quoted market prices of Ellison Co. stock in 2014 were: July 1 $30 per share October 1 $36 per share December 1 $40 per share The service period is for four years beginning January 1, 2014. As a result of the option granted to Wine, using the fair value method, Ellison should recognize compensation expense for 2014 on its books in the amount of
a. $4,500.
b. $1,500.
c. $1,125.
d. $0.
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