Yunger Corp. on January 1, 2004, granted stock options for 40,000 shares of its $10 par value common stock to its key employees. The market price of the common stock on that date was $23 per share and the option price was $20. The Black-Scholes option pricing model determines total compensation expense to be $240,000. The options are exercisable beginning January 1, 2007, provided those key employees are still in Yunger's employ at the time the options are exercised. The options expire on January 1, 2008.
On January 1, 2007, when the market price of the stock was $29 per share, all 40,000 options were exercised. The amount of compensation expense Yunger should record for 2006 under the fair value method is
A) $0.
B) $40,000.
C) $80,000.
D) $120,000.

Question

Quizplus · Accepted Answer

$240,000 ÷ 3 = $80,000/year