On July 1, 2010, Ellison Company granted Sam Wine, an employee, an option to buy 400 shares of Ellison 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 $1,800. Wine exercised his option on October 1, 2010 and sold his 400 shares on December 1, 2010. Quoted market prices of Ellison Co. stock in 2010 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, 2010. 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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