What should be the amount of compensation expense

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Question - On June 30, 2015, Sheffield Corp. granted compensatory stock options for 75100 shares of its $20 par value common stock to certain of its key employees. The market price of the common stock on that date was $36 per share and the option price was $30. The Black-Scholes option pricing model determines total compensation expense to be $896000. The options are exercisable beginning January 1, 2018, provided those key employees are still in Sheffield's employ at the time the options are exercised. The options expire on June 30, 2019.

On January 4, 2018, when the market price of the stock was $42 per share, all 75100 options were exercised. What should be the amount of compensation expense recorded by Sheffield Corp. for the calendar year 2017 using the fair value method?

$358400.

$0.

$896000.

$448000.

Reference no: EM132280329

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