Reference no: EM131765179

Question - Windon Corp. On January 1, 2005, granted stock options for 100,000 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 $600,000. The options are exercisable beginning January 1, 2008, provided those key employees are still in Windom's employ at the time the options are exercised. The options expire on January 1, 2009.

On January 1, 2008, when the market price of the stock was $29 per share, all 100,000 options were exercised. The amount of compensation expenses Windom should record for 2007 under the fair value method is

a. $0

b. $100,000

c. $200,000

d. $300,000

Please not only answer the question but will you show the work on how you got the answer.