On January 1, 2018, Evans Company granted Tim Telfer, an employee, an option to buy 5,000 shares of Evans Co. stock for $25 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 $37,500. Telfer exercised his option on September 1, 2018, and sold his 5,000 shares on December 1, 2018. Quoted market prices of Evans Co. stock during 2018 were

January 1$25 per share

September 1$30 per share

December 1$34 per share

The service period is for three years beginning January 1, 2018. As a result of the option granted to Telfer, using the fair value method, Evans should recognize compensation expense for 2018 on its books in the amount of

$45,000.

$37,500.

$12,500.

$7,500.