On January 1, 2021, Waterway Industries granted Dick Williams, an employee, an option to buy 500 shares of Waterway 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 $6440. Williams exercised his option on September 1, 2021, and sold his 500 shares on December 1, 2021. Quoted market prices of Waterway Co. stock during 2021 were:

January 1$32 per share September 1$38 per share December 1$42 per share

The service period is for two years beginning January 1, 2021. As a result of the option granted to Williams, using the fair value method, Waterway should recognize compensation expense for 2021 on its books in the amount of

a. $6440.

b. $3220.

c. $0.

d. $7040.