Compensation expense under the fair value method


Problem: On January 1, 2014, Sharp Corp. granted an employee an option to purchase 12,000 shares of Sharp's $5 par value common stock at $20 per share. The Black-Scholes option pricing model determines total compensation expense to be $280,000. The option became exercisable on December 31, 2015, after the employee completed two years of service. The market prices of Sharp's stock were as follows: January 1, 2014 $30 December 31, 2015 50 For 2015, should recognize compensation expense under the fair value method of:

a. $180,000.

b. $60,000.

c. $140,000.

d. $0.

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Accounting Basics: Compensation expense under the fair value method
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