On July 1, 2022, Watermelon Company granted Red Wine, an employee, an option to buy 600 shares of Watermelon Co. stock for $30 per share, the option is exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $2,700. Wine exercised his option on October 1, 2022 and sold his 600 shares on December 1, 2022. Quoted market prices of Watermelon Co. stock in 2022 were: July 1 $30 per share October 1 $36 per share December 1 $40 per share The service period is for three years beginning January 1, 2022. As a result of the option granted to Wine, using the fair value method, Watermelon should recognize compensation expense on its books in the amount of what amount? What amount would Watermelon recognize as compensation expense on the date Red Wine converts the option? What is the effect on Net Income of Watermelon on the date grant? What is the effect on Net Income of Watermelon on the date of conversion?