Question

On January 1, 2016, D Corp. granted an employee an option to purchase 8,500 shares of D's $3 par common stock at $21 per share. The options became exercisable on December 31, 2017, after the employee completed two years of service. The option was exercised on January 10, 2018. The market prices of D's stock were as follows: January 1, 2016, $31; December 31, 2017, $57; and January 10, 2018, $45. An option pricing model estimated the value of the options at $8 each on the grant date. For 2016, D should recognize compensation expense of:A. $ 0.B. $131,750.C. $25,500.D. $34,000.

Answer 1

D. $34,000

Step-by-step explanation:

Calculation for what D should recognize as compensation expense

First step is to calculate the total compensation

Total compensation=$8*8,500

Total compensation= $68,000

Now let calculate the compensation expense

Compensation expense=$68,000 ÷ 2 years

Compensation expense=$34,000

Therefore what D should recognize as compensation expense is $34,000