Question
On July 1, 2016, Ellison Company granted Sam Wine, an employee, an option to buy 400 shares of Ellison Co. shares for $30 per share,
On July 1, 2016, Ellison Company granted Sam Wine, an employee, an option to buy 400 shares of Ellison Co. shares 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 $1,800. Wine exercised his option on October 1, 2016 and sold his 400 shares on December 1, 2016. Quoted market prices of Ellison Co. shares in 2016 were: July 1 October 1 December 1 $30 per share $36 per share $40 per share The service period is for three years beginning January 1, 2016. As a result of the option granted to Wine, using the fair value method, Ellison should recognize compensation expense on its books in the amount of a. $1,800. b. $600. c. $450. d. $0.
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