Wall Drugs offered an incentive stock option plan to its employees. On January 1, 2016, options were granted for 60,000 $1 par common shares. The exercise price equals the $5 market price of the common stock on the grant date. The options cannot be exercised before January 1, 2019, and expire December 31, 2020. Each option has a fair value of $1 based on an option pricing model. Which is the correct entry to record compensation expense for the year 2016?

Compensation expense	80,000
Paid-in capitalstock options		80,000

Compensation expense	20,000
Common stock		20,000

Compensation expense	12,000
Paid-in capitalstock options		12,000

Compensation expense	20,000
Paid-in capitalstock options		20,000