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
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