Calculate Compensation Expense For Fair Value Option Pricing Model


On July 1, 2012, Ellison Company granted Sam Wine, an employee, an option to buy 600 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 $2,700. Wine exercised his option on October 1, 2012 and sold his 600 shares on December 1, 2012. The service period is for three years beginning January 1, 2012. As a result of the option granted to Wine, in 2013 Ellison should recognize compensation expense on its books in the amount of

a. $2,700.

b. $900.

c. $675.

d. $0.



The question belongs to Accounting and it discusses about calculation of compensation expense for fair value option pricing model for share price.

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